MOSCOW (MRC) -- LyondellBasell CEO Bob Patel says COVID-19 has cast uncertainty over both short- and long-term plans. Although he is optimistic about the overall economic outlook, he believes the pandemic could leave a deep imprint on the energy markets and global trade, challenging basic assumptions about project returns, supply, and demand, said Chemweek.
Patel discussed business conditions last week during a webcast with Lyn Tattum, vice president/events at IHS Markit and publisher of Chemical Week. "Near term, [we're] preparing for recovery and working through scenarios," Patel says. "Could there be a reduction in activity again? It's hard for me to imagine that we would go back to a complete lockdown like we just went through around the world, but we have to contemplate scenarios of a second wave and what might happen."
The company's medium-term planning revolves around finishing its large capital projects, particularly the propylene oxide/tert-butyl alcohol (PO/TBA) facility at Channelview, Texas. The project was originally slated for completion during the second half of 2021, but in late March, LyondellBasell announced that it would push the date back one year in response to the pandemic.
A new 550,000 metric tons/year high-density polyethylene (HDPE) plant at La Porte, Texas, the first to employ LyondellBasell's Hyperzone dual-reactor technology, has been online since February. "I think by July/August we should be running the operation very well and producing the grades we intended," says Patel.
LyondellBasell's longer-term planning has been complicated by the crude oil price collapse, which has significantly undercut the cost advantage of ethane-based polyethylene production in the US.
"We're thinking through feedstock scenarios," says Patel. "I believe that there will be advantage in the US, but the thing that we're really trying to assess is how wide that advantage will be. And then the implications on end-use demand--will people fly less, drive more? Will there be more work from home? And other market trends. What are the implications of all of that on demand for our end products? So we're also thinking through strategically what we need to do long-term." Patel says 2-3 years are likely to pass before the company decides to pursue another PE project.
Another major question is the effect of the pandemic on trade flows. "For the last 10-15 years, global trade has increased, [but] I do think that as a scenario we should contemplate whether what has happened in the last 90-120 days could slow that down," says Patel. "I don't think we significantly go backwards, but I could see that in China, for example, more of the local growth is met with local production."
LyondellBasell's polyolefins joint venture with China's Liaoning Bora, announced in September 2019, could play a key role in responding to such a shift. Patel says the project, which includes a steam cracker and downstream polyethylene (PE) and polypropylene (PP) units, is expected to begin production during the fourth-quarter of 2020.
"This could be a platform for us for future investment in China, in terms of adding onto the existing facilities over the next decade or so," says Patel. "While we didn't predict something like this at the time we undertook the Bora project, we were firmly of the mind that we want to be [both] where the market is and where the feedstock is. We wanted to kind of have diversity of investment, and I think it will prove out to be quite a good investment."
Patel points to the August 2018 acquisition of plastics compounder A. Schulman to illustrate the benefits of LyondellBasell's diversification strategy. "Our legacy compounding business was 95% automotive, and with the acquisition of A. Schulman, we're able to get into applications like food packaging, medical, other durable goods, and some other products in areas that are not just polypropylene based," he says. "With the slowdown in automotive in our compounding business, it's actually the A. Schulman part that's doing quite well, so I think this notion of diversifying our participation in end-use has really paid off."
As MRC reported earlier, global petrochemical producer LyondellBasell has reduced rates across its system to accommodate lower demand wrought by shutdowns around the globe to stem the spread of the coronavirus pandemic, said the company's CEO Bob Patel. LyondellBasell's overall global petrochemical and refining assets were expected to operate at 60% to 80% of nameplate capacity through the second quarter, Patel said during the company's first-quarter earnings call. European crackers were seen running at 80% to 85%, while US crackers were expected to run at about 75%, he said.
We also remind that to further aid in the fight against the COVID-19 pandemic, LyondellBasell (LBI) donated a key ingredient to Huntsman Corporation to produce hand sanitizer for US first responders.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 721,290 tonnes in the first four month of 2020, up by 4% year on year. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) shipments grew partially because of the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market totalled 347,440 tonnes in January-April 2020 (calculated by the formula production minus export plus import). Supply exclusively of PP random copolymer increased.
LyondellBasell is one of the largest plastics, chemicals and refining companies in the world. Driven by its 13,000 employees around the globe, LyondellBasell produces materials and products that are key to advancing solutions to modern challenges like enhancing food safety through lightweight and flexible packaging, protecting the purity of water supplies through stronger and more versatile pipes, and improving the safety, comfort and fuel efficiency of many of the cars and trucks on the road. LyondellBasell sells products into approximately 100 countries and is the world's largest licensor of polyolefin technologies.
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