PPG to cut costs in response to COVID-19

MOSCOW (MRC) -- PPG Industries announced a plan to cut about USD160-170 million/year in costs in an effort to reduce the company’s cost structure due to the impact of the COVID-19 pandemic. The plan includes staffing reductions, under a “voluntary separation program,” in the US and Canada, PPG says.

“These measures will enable the company to come out of the crisis with lower structural costs,” says PPG chairman and CEO Michael McGarry. “Despite efforts to reduce our total costs, we remain committed to continuing our investments in growth-related initiatives, including fully funding our research and development for products, services and digital capabilities that will drive long-term growth."

PPG will record a pre-tax restructuring charge of USD160-180 million, or 52-58 cents/share, in connection with the cost-cutting program. An additional USD10 million in restructuring costs is likely over future quarters. The second-quarter costs are mostly related to employee severance, although the precise number of job cuts the program entails was not disclosed.

PPG also noted that “the aggregate impact [of COVID-19] and pace of recovery is consistent with the company’s expectations. This includes strong demand for architectural do-it-for-yourself coatings, aerospace applications for military programs, and packaging coatings, but which has been more than offset by soft demand for commercial aerospace, automotive OEM, automotive refinish, architectural do-it-for-me and certain general industrial coatings end uses."

Volumes were down by about 35% year-on-year (YOY) in April, and down by about 30% YOY in May, according to PPG. There was YOY volume improvement in China through the spring, and volumes grew in the US and Europe sequentially from April to May, with further sequential increases expected in June.

As MRC informed earlier, Russia's output of products from polymers grew in April 2020 by 11.2% year on year due to quarantine restrictions. However, this figure increased by 3.4% year on year in the first four months of 2020. According to the Russian Federal State Statistics Service, April production of unreinforced and non-combined films decreased to 107,000 tonnes from 110,400 tonnes a month earlier. Output of films products grew in the first four months of 2020 by 12.5% year on year to 402,800 tonnes.
MRC

BASF secures permit for Schwarzheide battery materials plant

MOSCOW (MRC) -- BASF said that construction of its previously announced battery materials plants in Europe is advancing as planned, said Chemweek.

After the casting of the foundation for its precursor cathode active material (PCAM) plant at Harjavalta, Finland, BASF has officially started construction. In addition, BASF has secured the construction permits to begin building the new cathode active material (CAM) plant at Schwarzheide, Germany. Despite the ongoing COVID-19 pandemic, the multi-step investment project is progressing as scheduled for a 2022 startup. With these facilities, BASF will provide a local supply to cell producers and OEM customers in Europe.

The new battery materials plants are part of BASF’s goal to be the leading global supplier of high-energy density CAM for the automotive industry. The initial capacities will enable the supply of around 400,000 full electric vehicles per year with BASF battery materials.

“We are determined to provide innovative high-performance products with a minimized CO2 footprint along the battery value chain. Through regional production in combination with renewable energy sources as well as use of energy efficient and proprietary process technologies in our new plants in Europe, we are able to reduce CO2 footprint significantly – by around 30% compared with conventional industry standard on the market,” says Peter Schuhmacher, president, catalysts division at BASF.

We remind that BASF has restarted its No. 1 steam cracker following a maintenance turnaorund. Thus, the company resumed operations at the plant on September 30, 2019. The plant was shut for maintenance in mid-August, 2019. Located at Ludwigshafen in Germany, the No. 1 cracker has an ethylene production capacity of 235,000 mt/year and a propylene production capacity of 125,000 mt/year.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries. BASF generated sales of EUR59 billion in 2019.
MRC

Saudi Aramco buys SABIC shares on market as it completes acquisition

MOSCOW (MRC) -- State-owned Saudi Aramco bought 2.1 billion shares of Saudi Basic Industries (SABIC) on the stock market on Sunday as it completed its deal agreed last year to buy 70% of the petrochemical giant, reported Reuters with reference to sources and market data.

Four transactions were executed on the Saudi exchange, known as Tadawul, involving SABIC shares worth 259,125 billion riyals ($69.1) billion, Tadawal data showed, without naming the buyer.

Four sources confirmed the transactions were part of the Aramco acquisition agreed in 2019 and which will be one of the biggest in the global chemical industry once completed.

The shares are being sold by the Saudi sovereign fund, the Public Investment Fund (PIF), giving it more cash to invest in the government programme to diversify the economy away from oil.

Sources told Reuters in May that Aramco had been looking to restructure the deal after SABIC’s market value fell more than 40% due to an oil price slump. Sunday’s transactions suggested the deal price had not changed but it was unclear whether the structure for making payments to PIF had been revised.

Sunday’s share trades involved cross transactions, also known as special deals on Tadawul, which are executed at an agreed price between a buyer and seller, without those involved.

“The deal completion is on-track with expectations to be finalised before the end of the second quarter,” Aramco told Reuters in a statement when asked about the transactions. “We will make a completion announcement in due course.”

Aramco has been boosting investments in refining and other downstream industries.

Three of Sunday’s deals were completed at 123.40 riyals per share and the fourth at 123.20 riyals, prices that were similar to last year’s agreed price of 123.39 riyals per share.

SABIC shares ended at 88.50 riyals on Sunday.

Aramco raised USD10 billion in a loan this year to help with the SABIC acquisition, sources previously said.

As MRC wrote before, SABIC has recently announced its financial results for the first quarter, reporting a net loss of 950 million Saudi riyals (USD250 million).

We remind that Sinopec SABIC Tianjin Petrochemical Co. (SSTPC), a 50-50 joint venture of Sinopec and Sabic, shut its naphtha cracker in Tianjin on 1 May 2020 for routine maintenance work. The cracker is expected to remain off-line until early July 2020. The naphtha cracker is designed to produce 1 million tons/year of ethylene, which supplies several local buyers in the Tianjin area. Besides, the company is also planning to expand its cracker capacity to 1.3 million tons/year in 2021.

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.

Saudi Basic Industries Corporation (Sabic) ranks among the world"s top petrochemical companies. The company is among the world"s market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.

Saudi Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national oil and natural gas company based in Dhahran, Saudi Arabia. Saudi Aramco"s value has been estimated at up to USD10 trillion in the Financial Times, making it the world"s most valuable company. Saudi Aramco has both the largest proven crude oil reserves, at more than 260 billion barrels, and largest daily oil production.
MRC

Oil demand recovery under spotlight as lockdowns ease

MOSCOW (MRC) -- Optimism over a swift and steady economic rebound from crushing pandemic lockdowns have helped global oil prices stage a dizzying rebound from near two-decade lows in April, reported S&P Global.

Nearly all the oil demand metrics have been encouraging so far. After bottoming out in early to mid-April, global economic indicators are improving with the exception of aviation activity which remains well below seasonal norms.
Implied driving activity is already well above pre-crisis levels in both the US and Germany, Europe's biggest economy and user of fuels.

In the week to June 5 alone, the US saw a surge in refined product demand to 17.57 million b/d, the strongest since the week ended March 27 when the first statewide lockdowns went into effect.

Market consensus has formed around an expected global oil demand slump of around 8-9 million b/d this year after a fifth, or some 20 million b/d, of demand, was wiped out by lockdowns in April.

But the so-called V-shaped recovery path - where global oil demand will continue to rise steadily to snap back to its previous trajectory by year-end - is being called into question.

One major uncertainty over oil's recovery is how much of the world's upended work and social behavior partners during the crisis stick even after lockdowns are lifted.

On June 9, the US' Energy Information Administration cut its forecast for 2021 US oil demand for a second time, forecasting demand will be 1.26 million b/d lower than its pre-lockdown baseline.

Standard Chartered is even more bearish, predicting slow recoveries in jet fuel demand and diesel demand will hobble the US rebound next year.

"We think that much of the market is ignoring the downside risks to demand arising from both economic weakness and permanent changes in patterns of energy use brought on by COVID-19," the bank's energy analyst Emily Ashford said in a note.

Fears that the pandemic could inflict lasting damage on oil demand due to less commuting, fewer business trips and hardwired adoption of social distancing, are hard to gauge. For now, at least, most market watchers feel it is still too early to predict how behavior patterns will impact demand.

Research suggests that overall energy savings from mass home-working are likely to be limited, and in many cases could be non-existent, according to The World Economic Forum.

The other key variable in current demand recovery forecasts is the potential for second-wave of infections --and resulting return to lockdowns-- if the current curbs are lifted too quickly.

Goldman Sachs last week raised its forecast for Brent crude by USD6/b for the second half of 2020 to USD45/b on stronger recovery data but noted risks from a bounce in global infection rates.

"The positive start to reopening does not resolve the uncertainties about a potential second wave of infections or of a more difficult recovery beyond the easier gains of the first few months," the bank said.

While there are no signs yet that ongoing efforts to loosen curbs on mobility and business activity are fueling new cases in Europe and the US, elsewhere moves to contain the coronavirus are more mixed.

In some emerging economies of Latin America and South Asia, single-day coronavirus infection rates continue to spike.

India saw the highest single-day spike of 10,000 new cases on June 7 while Indonesia logged almost 1,000 new cases on June 6, a new single-day high for the country.

In Brazil, the situation has continued to worsen with the country's most populous state Sao Paulo reporting a record number of COVID-19 deaths for the second day running on June 10. Chile, meanwhile, still has the highest infection rate in South America.

Even under the default, V-shaped demand scenario, a uniform return to pre-crisis demand levels is far from assured with large potential disparities between geographic and specific fuel markets.

According to forecasts by S&P Global Platts Analytics, Western Europe is set to feel the most pain in terms of oil demand impact with 13% of its oil consumption set to disappear in 2020.

The US, however, is set for the biggest loss in terms of volumes with 2.4 million b/d impacted, or 29% of the global total, according to the outlook.

In China, where the lockdown response was initially viewed as extreme, oil demand may fall just 340,000 b/d this year, according to Platts Analytics, helped by government incentives to limit fuel price falls which created an import binge during May.

In terms of oil products, US gasoline demand is by far the biggest casualty accounting for almost half of the 2.6 million b/d global impact for the key driving fuel.

It is the grounding of thousands of flights, however, that will see jet fuel take the largest hit by market share with almost a quarter of jet demand disappearing this year.

Indeed, the tail end of the demand recovery story could well be dominated by the impact from long-lasting, tighter controls on international passenger movements in addition to a reduced appetite for air travel, many believe.

Despite a relatively rapid recovery in non-commercial flights since May, S&P Platts Analytics still predicts global jet and kerosene demand will average almost 800,000 b/d lower in 2021 than 2019.

With analysts in uncharted waters to predict the new, post-COVID normal, it may be some time before market watchers can confidently call the world's return to full health from the pandemic and with it their appetite for oil.

As MRC informed previously, global oil consumption cut by up to a third in Q1 2020. What happens next in the oil market depends on how quickly and completely the global economy emerges from lockdown, and whether the recessionary hit lingers through the rest of this year and into 2021.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

We remind that, in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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.
MRC

Thai energy group PTT cuts 2020 investment

MOSCOW (MRC) -- State-owned Thai oil and gas company PTT Pcl said it would cut its investment budget across the group by 10-15% this year and some projects will be delayed as partners face challenges from the coronavirus, according to Hydrocarbonprocessing.

Chief Executive Auttapol Rerkpiboon, who took up the post last month, said the PTT group faced "double effects" from the oil price slump and the coronavirus outbreak.

"All the projects that have been approved will go forward, but we will review and prioritize those in the pipeline," he told reporters.

PTT has six flagship companies including PTT Exploration and Production Pcl, oil refiner IRPC Pcl and electricity firm Global Power Synergy Corporation Pcl and had planned to invest 250 billion baht ($8.08 billion) across the group this year.

"Of the 250 billion, we expect a reduction of around 10% to 15%," Auttapol said. That would be a reduction of between 25 billion baht and 37.5 billion baht (USD808 million-USD1.2 billion).

For PTT alone, the company will reduce investment this year by 15 billion baht to 54 billion baht, he said.

Sales at its upstream arm, PTTEP are expected to drop by 7% and gas volumes are likely to decline by up to 10% this year, the CEO said, adding that he expects PTT’s refineries to have a utilization rate of around 90% to 100%.

The company has 66 billion baht from corporate bonds ready if needed, he said, but does not expect to use the entire sum and the company will maintain a debt-to-equity ratio below one.

Its debt-to-equity ratio in the first quarter was 0.55.

Auttapol said PTT would also focus on expanding its gas business overseas and position itself as a liquefied natural gas trading hub for the region as the Thai government liberalizes the gas market.

PTT’s gas business faced new competition in Thailand after local rivals Gulf Energy Development Pcl and B. Grimm Power Pcl received government licenses to import LNG.

Prior to 2017, PTT was the country’s sole LNG importer.

As MRC reported before, PTTGC America and Daelim Chemical USA, equal partners in their long-planned PTTDLM petrochemical project in Mead Township, Belmont County, Ohio, have recently delayed making a final investment decision (FID) on their multi-billion-dollar petrochemical project, originally expected in the middle of 2020.

We remind that PTT Global Chemical (PTTGC) fully restarted its No. 2 cracker in Map Ta Phut in early March,2020, after a planned turnaround. The company started resuming operations at the cracker by end-February, 2020. The cracker was shut for maintenance on January 20, 2020. Located at Map Ta Phut, Thailand, the No. 2 cracker has an ethylene production capacity of 400,000 mt/year. The company also operates No. 1 cracker at the same site with a capacity of 515,000 tonnes of ethylene and 310,000 tonnes of propylene per year, which was also shut on 23 January, 2020, for a 40-day turnaround.

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.

PTT Global Chemical is a leading player in the petrochemical industry and owns several petrochemical facilities with a combined capacity of 8.45 million tonnes a year.
MRC