Philly refiner nears final deal with developer, amends price again

MOSCOW (MRC) -- A deal to sell the Philadelphia Energy Solutions (PES) oil refinery to a Chicago-based real estate developer is expected to close on Friday for USD26.5 million less than originally agreed to, reported Reuters with reference to lawyers for the bankrupt refiner's statement in court.

The sale to Hilco Redevelopment Partners (HRP) would end the prospect of a restart of the 335,000-barrel-per-day south Philadelphia refinery, the largest and oldest on the East Coast, which was idled a year ago after a fire badly damaged the plant.

PES agreed to reduce the purchase price to USD225.5 million, USD26.5 million less than agreed upon earlier this year. HRP requested a reduction due to economic uncertainty caused by the coronavirus pandemic and higher-than-expected costs to clean up the refinery site.

Earlier this month, the two sides asked the US Bankruptcy Court for the District of Delaware to cut the purchase agreement by USD27.5 million but settled overnight on the current price tag, lawyers for the refiner said. The court approved the new agreement.

PES filed for bankruptcy and shut its refinery after a series of explosions and fire at one of its gasoline processing units on June 21, 2019. More than 1,000 full-time employees were laid off, including 640 United Steelworkers members.

Union members were not given severance and have been waiting for the sale to be finalized in order to receive several thousand dollars in transition pay. The price cut will not affect that pay, said Steve Levine, an attorney for PES’ unsecured creditors.

Certain financial lenders to PES will receive less as a result of the lower price.

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.

Dow expects lower EBITDA due to slow recovery in consumer, automotive sectors

MOSCOW (MRC) -- Dow says it expects a USD350-million headwind to second-quarter EBITDA, mostly due to a slower-than-expected demand recovery in the automotive and consumer durables end markets, reported Chemweek.

The demand decline will particularly impact Dow’s polyurethanes business, where second-quarter demand is expected to decline by about 25–30% year on year (YOY). Dow had previously expected a 15–20% YOY demand decline for polyurethanes in the second quarter.

About two-thirds of the EBITDA impact “can be attributed to the delayed and slower recovery in the automotive, construction, appliance, and furniture sectors,” Dow president and CFO Howard Ungerleider said in a virtual conference presentation this morning. The rest “is being driven by margin pressure due to lower demand, which is negatively impacting pricing power, along with MEG softness,” he added.

On the positive side, volumes in plastics have been “resilient,” and will be roughly flat YOY for the quarter, according to Ungerleider. The do-it-yourself (DIY) coatings end market has also held up well, he says. “Solid demand trends continue in the packaging, home care, industrial and institutional cleaning, and health and hygiene industries,” Ungerleider adds.

Due to the lower-than-expected demand and profits, Dow “will be taking further cost actions,” according to Ungerleider. Details of additional cost reductions have not been disclosed, and will be announced when the company releases second-quarter earnings. Dow has previously announced plans to cut over USD1 billion in cost, including reductions in capital expenditure and operating expenses.

Despite the slow recovery in some end markets, Dow says that sales are on the rise. “It is encouraging to see the pace of recovery accelerate in June in almost every value chain in our portfolio,” according to Ungerleider.

As MRC informed earlier, Dow Chemical will restart three idled polyethylene (PE) plants in Texas and Argentina and two elastomers plants in Louisiana as demand begins to rebound. And the company expects economic recovery to take hold in the second half of 2020 as gradual emergence from coronavirus pandemic-related shutdowns continues.

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.

The Dow Chemical Company is an American multinational chemical corporation headquartered in Midland, Michigan, United States. Dow is a large producer of plastics, including polystyrene (PS), polyurethane, polyethylene, polypropylene, and synthetic rubber.

AGs from seven states request RFS waivers from U.S. EPA

MOSCOW (MRC) -- The chief legal officers of seven states — Louisiana, Texas, Oklahoma, Utah, Arkansas, Oklahoma and Wyoming - added their names and states to the list of those urging EPA to issue a waiver of 2020 Renewable Fuel Standard (RFS) compliance burdens, said Hydrocarbonprocessing.

As the Attorneys General (AGs) note, EPA is empowered with authority under the Clean Air Act to waive all or part of RFS annual compliance burdens when the fulfillment of such obligations would cause severe economic harm to a state, region or the country as a whole. The AGs write, “Congress intended the renewable fuels program to be transformative, not destructive. If the program threatens the very economies it intends to modify, the Administrator is empowered to take necessary steps to protect the regulated markets by waiving the program’s requirements."

This year, the AGs note EPA and other agencies have exercised authority to provide industries relief from regulatory policies in order to “maximize and sustain capacity” and help keep the U.S. economy afloat. It is only fitting that EPA use the tools provided by Congress to prevent states and regions from facing any more severe economic harm because of surging compliance costs in the RFS regulatory market.

The refining industry is critical to the economy and energy security of the United States. The sector’s health and capacity — which is an economic anchor for entire states and regions — is threatened by growing RFS mandates and compliance costs that have hit two-year highs in the midst of an historic economic downturn.

The time for EPA to invoke its general waiver authority and reduce RFS regulatory costs is now.

As MRC informed earlier, 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 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.

COVID-19 - News digest as of 26.06.2020

1. Indian Oil reports drop in quarterly petchem earnings

Indian Oil Corporation posted a consolidated net loss of Rs 7,782 crore for the quarter ended March 31 on a one-time loss of Rs 11,304.64 crore. It is the refiner's first quarterly loss in more than four years, said Economictimes. The company had posted a net profit of Rs 6,004.88 crore in the corresponding quarter last year. On the other hand, the revenue of the company declined 3.35 per cent year-on-year (YoY) to Rs 1,42,371.85 crore during the quarter under review. “The holding company is consistently valuing its inventories at cost or net realizable value (NRV) whichever is lower. For this purpose, NRV is derived based on the actual realisation in the specified subsequent period as per regular practice,” IOCNSE -2.01 % said in a regulatory filing. It further added that due to the coronavirus pandemic and changes in oil market scenarios there was a significant fall in oil prices which led to write-down in valuation of inventories below cost for the specified period of Rs 6,855.35 crore.


PP production in Russia increased by 26% in January-May

MOSCOW (MRC) - Production of polypropylene (PP) in Russia increased to about 765,300 tonne in first five months of this year, up 26% year on year, compared to the same period of 2019. ZapSibNeftekhim accounted for the main increase in the output, according to MRC's ScanPlast report.

May PP production in the country grew to 162,900 tonnes, compared with 129,600 tonnes in April; SIBUR Tobolsk, ZapSibNeftekhim and Poliom increased their capacity utilisation. Russia's overall PP production reached 765,300 tonnes in the first five months of 2020, compared to 608,900 tonnes a year earlier. Four out of eight producers increased their capacity utilisation, with a new producer -ZapSibNeftekhim - accounting for the main increase in capacity utilisation.

The structure of PP production by plants looked the following way over the stated period.

SIBUR Tobolsk shut its facilities for scheduled preventive repairs in mid-March - mid-April. As a result, supply of homopolymer PP into Russia grew to 38,500 tonnes in May, compared with 17,500 tonnes in May 2019. The Tobolsk plant's total PP production reached 168,600 tonnes in the first five months of 2020, down by 19% year on year.

ZapSibNeftekhim produced about 44,100 tonnes of polypropylene in May compared with 32,600 tonnes in April. The plant's overall output totalled 193,100 tonnes in the first five months of 2020.

Omsk Poliom reduced its capacity utilisation in May, having produced about 14,300 tonnes of PP, compared to 13,000 tonnes a month earlier.
Total PP production at the plant over the reported period was about 78,900 tonnes, down 12% year on year.

Nizhnekamskneftekhim produced about 19,000 tonnes of propylene polymers in May versus 18,000 tonnes a month earlier. The Nizhnekamsk plant's overall output of polymer exceeded 92,000 tonnes in the first five months of 2020, compared to 87,300 tonnes a year earlier.

Tomskneftekhim produced about 13,100 tonnes of polypropylene in May to 13,400 tonnes in April. Total PP production by the producer increased to 64,400 tonnes in January-May 2020, up 3% year on year.

May PP production at Ufaorgsintez decreased to about 9,900 tonnes from 11,200 tonnes a month earlier. The Ufa plant's overall output of polymer reached 53,500 tonnes in January-May 2020, down 4% year on year.

Neftekhimiya (Kapotnya) produced more than 13,000 tonnes of PP in May, compared to 12,600 tonnes a month earlier. The plant's overall PP output reached 62,600 tonnes in the first five months of 2020, up by 2% year on year.

Stavrolen (Lukoil) produced 10,900 tonnes of propylene polymers in May versus 11,300 tonnes in April. In general, the total production of polymers of propylene in the first five months of this year at the Budenovsk enterprise reduced to 52,100 tonnes against 45,000 tonnes a year earlier.