Formosa Chemical & Fibre Corp. swings to loss

MOSCOW (MRC) -- Formosa Chemicals & Fibre Corporation, a Taiwan-based manufacturer of chemical products, posted revenue of USD64.4 billion (Taiwan dollars) in first quarter (Q1) FY20 ended on March 31, 2020, compared to the revenue of USD89.2 billion in same period prior year, said Fibre2fashion.

Company reported total loss of USD4.3 billion compared to profit of USD9.1 billion in Q1 FY19. Operating loss for the reported quarter were USD1.9 billion compared to operating profit of USD8.2 billion in same period prior year. Total other comprehensive loss for the period were USD47.2 billion compared to comprehensive income of USD11.8 billion in Q1 FY19.

Net loss attributable to owners of the parent during Q1 was USD4.6 billion compared to net income attributable to owners of the parent of USD8.5 billion in same period prior year.

The Formosa group manufactures and sells a variety of petrochemical products, including the spinning, weaving, dyeing and finishing of rayon and nylon fibre.

As MRC informed earlier, Formosa Petrochemical plans to shut down its No.3 cracker in Taiwan for maintenance in mid-August, 2020. The 1.2-MMt/y No. 3 cracker is due to be offline until end-September.

As MRC wrpte previously, Formosa took off-stream its No.2 cracker in Taiwan on 1 June, 2020. No reason for unplanned closure was given. The cracker is expected to be idle during one week. Located at Mailiao in Taiwan, the No.2 cracker has an ethylene production capacity of 1.03 million mt/year, propylene production capacity of 515,000 mt/year and butadiene production capacity of 162,000 mt/year. Formosa, Asia's top naphtha importer, operates three naphtha crackers in Mailiao. These units have a total capacity of 2.93 million tpy of ethylene.

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.

Formosa Chemicals & Fibre Corp is a Taiwan-based company principally engaged in the manufacture and sale of chemical products. The main products of the Company include petrochemical plastic raw materials, synthetic fiber products and common fluid products. Its petrochemical plastic raw material products include benzene, paraxylene (PX), o-xylene (OX), toluene, styrene monomer (SM), phenol, acetone, pure terephthalic acid (PTA), polystyrene (PS), polypropylene (PP) and polycarbonate resin (PC), among others. Its synthetic fiber products include mirabilite, synthetic fiber yarn, cotton yarn, blended yarn, staple fiber cloth, long-fiber cloth and nylon yarn, among others. Its common fluid products include electricity, filtered water, chilled water, soft water, pure water and steam. The Company operates businesses in Mainland China, Asia, the Middle East, America and Europe, among others.

COVID-19 - News digest as of 23.06.2020

1. Tasnee reports 94% plunge in Q1-20 losses

MOSCOW (MRC) -- The National Industrialization Company (Tasnee) has reduced its net losses after Zakat and tax by 94% annually in the first quarter (Q1) of 2020 to reach SAR 76.5 million, said Mubasher. The company generated SAR 659.4 million worth of revenues in the first three months of 2020, down by 10.8% year-on-year (YoY) when compared to SAR 739.2 million, according to a bourse filing on Sunday. The decrease in net loss is largely due to the non-cash losses that resulted from re-measurement of discontinued operations of Cristal business classified as held for sale in Q1-19 amounting to SAR 1.45 billion. In addition, financing costs, Zakat provision and income tax declined. This came despite the drop in average selling prices of all products and slumping demand of some products due to the coronavirus (COVID-19) outbreak, a lower share of profit from investments in associates and joint ventures (JV), decrease in other income, and a rise in general and administrative expenses.


Gazprom still eyeing Nord Stream 2 completion by end-2020/start-2021

MOSCOW (MRC) -- Construction of the 55 Bcm/year Nord Stream 2 gas pipeline from Russia to Germany is still set to be completed at the end of 2020 or the start of 2021, a senior official at Russian gas giant Gazprom said June 22, despite the threat of expanded US sanctions against the project, reported S&P Global.

Gazprom's head of investor relations, Anton Demchenko, told investors the company continued to pursue its completion.

"I can briefly confirm that we continue to work on this project and expect that its construction will be completed at the end of 2020 or the beginning of 2021," he was quoted as saying by the RIA Novosti news agency.

Gazprom could not be immediately reached to confirm the comments, which are in line with remarks by Russian President Vladimir Putin in January who said the pipeline would be completed by the end of 2020 or in the first quarter of 2021.

Just 160 km (99 miles) of Nord Stream 2 is left to lay in Danish waters out of the total 2,460 km length.

The Gazprom-owned Nord Stream 2 development company had hoped to bring the project online by the end of 2019, but first permitting issues in Denmark and then the US sanctions meant the project has been delayed.

The 55 Bcm/year pipeline is crucial to Russia's plans to scale down from 2021 the use of the Ukrainian transit corridor in its gas supplies to Europe.

With the uncertainty over how the line will be finished, the US is also pressing to introduce expanded sanctions against the project.

At the start of June, a new US Senate bill was introduced that aims to block completion of the project by expanding existing sanctions to target more companies involved in laying the line's final segment, including insurers and service companies.

Nord Stream 2 has also been fighting for an exemption from the amended EU Gas Directive and has now appealed against a May 15 ruling by the German regulator Bundesnetzagentur that rejected a request for a waiver.

Nord Stream 2 in January asked the regulator for a derogation from the EU's amended gas directive rules, which came into effect in May 2019.

Such a derogation would have allowed the German section of the pipeline to be exempted from third-party access and unbundling rules, and requirements on transparent tariffs.

However, the regulator ruled that Nord Stream 2 had not been completed by the time the amendments came into force, meaning the pipeline was not eligible for a waiver.

"Nord Stream 2 has filed an appeal to the Higher Regional Court in Dusseldorf against that decision," Nord Stream 2 said in emailed comments June 22.

"Nord Stream 2 maintains that on the effective date of May 23, 2019, the pipeline had been completed from the perspective of economic functionality," it said.

"Based on the applicable legal framework at that time, the company had made irrevocable investments worth billions of euros long before the European Commission announced its plan to amend the Gas Directive."

Separately, Gazprom Export's head of pricing, Sergei Komlev, told investors June 22 that the company expected its average gas export price in 2020 to be USD130-USD140/1,000 cu m.

That is in line with a previous estimate by Gazprom in April of around USD133/1,000 cu m.

Komlev, cited by Russian news agencies, also said Gazprom was in talks with some long-term contract holders about price revisions, but that there was no plan for a serious revision given changing long-term market conditions.

As MRC reported earlier, Denmark expects to rule "within four weeks" on a request from the developer of the Nord Stream 2 gas pipeline from Russia to Germany for permission to lay the line in Danish waters using ships with anchors, a spokesman for the Danish Energy Agency said June 17.

We remind that Gazprom neftekhim Salavat shut down its dioctyl phthalate (DOP) production for a scheduled maintenance. Market participants and a plant"s representative said Gazprom neftekhim Salavat took off-stream its DOP production for a long scheduled turnaround. The outage began on 12 May and will last for about 30 day.

According to MRC's ScanPlast report, Russian producers of unmixed PVC decreased capacity utilisation in April. However, Russia's overall PVC output totalled 351,000 tonnes in January-April 2020, up by 2% year on year.

Index of chemical production in Russia grew by 5.4% in January - May

MOSCOW (MRC) -- Russia's output of chemical products rose by 4.4% year on year in May 2020 . Thus, production of basic chemicals increased year on year by 5.4% in the first five months of 2020, according to Rosstat's data.

According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-May.

Production of benzene was 110,000 tonnes in May 2020, which equalled the figure a month earlier. Overall output of this product reached 615,000 tonnes over the stated period, up by 1.7% year on year.

May production of sodium hydroxide (caustic soda) was 112,000 tonnes (100% of the basic substance) versus 101,000 tonnes a month earlier. Overall output of caustic soda totalled 543,000 tonnes in the first five months of 2020, up by 1.4% year on year.

2,283,000 tonnes of mineral fertilizers (in terms of 100% nutrients) were produced in May 2020 versus 2,055,000 tonnes a month earlier. Overall, Russian plants produced slightly less than 10,400,000 tonnes of fertilizers in January-May 2020, up by 3.1% year on year.

Last month's production of polymers in primary form grew to 820,000 tonnes from 775,000 tonnes in April. Overall output of polymers in primary form totalled 4,115,000 tonnes over the stated period, up by 16.6% year on year.

Russian energy ministry expects average oil price of USD35/b in 2020

MOSCOW (MRC) -- The Russian energy ministry expects the average Urals price to be USD35/b in 2020, minister Alexander Novak said in an interview with German daily Handelsblatt published June 20, reported S&P Global.

Russia's 2020 budget is based on an oil price of USD42/b, officials said previously. Novak said he currently only expects oil services providers, who have been hit hard by Russia's significant oil production cut under the OPEC+ agreement, to require state support.

"We have very flexible taxation for oil producers, dependent on the oil price," the report quoted Novak as saying. "Our oil companies can continue to produce even when the oil price is low, thanks to reserves and then low taxes."

He added that large Russian oil and gas companies will continue investment programs, with some cuts of up to 20%, but no fundamental changes.

Novak added that he does not expect oil demand to return to pre-crisis levels in the near term.

"Certainly not this year," Novak said. "We hope that it will happen in 2021. But maybe it will take two or three years. Because people will fly less, drive less, travel less and do more online. The economy will grow again, but the demand for oil from transport will remain lower."

Russia does not currently see a need to deepen oil production cuts under the OPEC+ agreement, but the group will continue to discuss the situation monthly, Novak said.

"In July the agreement will result in two million fewer barrels of oil on the market than originally planned," Novak said. "Then we'll see. There is a lot that is unclear: consumer demand, and whether there will be a second wave of coronavirus that many expect. That would again disrupt markets considerably."

Novak also discussed volatility in the gas market as a result of the coronavirus pandemic, recent warm winters and increasing LNG capacity.

"I hope that the worst is behind us on the gas market," he said in the interview. "Although it is much more difficult here because there is no regulatory body like OPEC in the gas sector, and coordination is much more difficult. This is why the gas market is more chaotic and bankruptcies will occur."

Novak said that he does not expect gas prices to go negative for a sustained period.

"This is hardly possible, at most it may happen on small local markets, like in the US for oil, where at times it could not be transported or stored," Novak said. "On the gas market there was a very short time on a European gas hub, but these are very short-term slumps. I rule out a longer, system-relevant negative gas price."

As MRC informed before, 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.