COVID-19 - News digest as of 17.07.2020

1. Total refining margin sinks to six-year low as sales slump, crude rebounds

MOSCOW (MRC) -- Total, Europe's biggest refiner, saw its average refining margin slump to the lowest level in six years during the second quarter when demand for fuels collapsed due to COVID-19 lockdowns while oil prices began to recover, reported S&P Global. Total's "variable cost margin" for its European refineries in the second quarter fell to USD14.30/mt or about USD1.95/b, down from USD26.30/mt in the previous quarter and USD27.60/mt in the year-earlier period, it said July 15 in a trading statement.

MRC

MOSCOW (MRC) -- Nova Chemicals declared force majeure on supplies from its Joffre C4 (butene) linear low density polyethylene facility near Red Deer in Alberta, Canada, a company spokeswoman said in an email July 14 to S&P Global.

The declaration will cover all C4 LLDPE resins produced at the facility effective July 13, the company also said in a letter to customers.

"Over the past several days we have experienced mechanical failures beyond our reasonable control at our two butene linear low polyethylene (LLDPE) reactors in Joffre. As the result of the repair timing and current inventory levels, we have declared force majeure on all butene LLDPE," spokeswoman Jennifer Nanz said in the email.

The event does not affect any of NOVA's other polyethylene products, Nanz said.

"We are committed to safely resolving these issues as quickly as possible. However, we do not yet know the expected length of the force majeure," Nanz said.

The Joffre facility has two LLDPE units with a combined capacity of 1.1 million mt/year, according to data compiled by Platts.

NOVA said in the letter it could provide "no firm indication" as yet on the extent to which the company would be able to supply its customers needs during the force majeure. Nanz could not provide any further information.

As MRC reported before, NOVA Chemicals expanded ethylene production capacity by 20% at its cracker in Corunna, Ontario from the previous capacity of about 839,000 tpy. The expansion occurred between 2014 and 2018 and was part of a wave of expansions and upgrades to NOVA's existing facilities near Sarnia, Ontario. Other upgrades in the plan included a debottlenecking of the Moore low-density polyethylene (LDPE) line and a retrofit of the Moore high-density polyethylene (HDPE) line.

According to MRC's ScanPlast report, May LLDPE shipments to the Russian market rose to 31,290 tonnes from 30,450 tonnes a month earlier, production increased. Overall LLDPE shipments to Russia totalled 153,080 tonnes in the first five months of 2020, down by 5% year on year. Production and exports increased by 2 times.

NOVA Chemicals Corporation is a plastics and chemical company headquartered in Calgary, Alberta, Canada, and is wholly-owned ultimately by Mubadala Investment Company of the Emirate of Abu Dhabi, United Arab Emirates.
MRC

MOSCOW (MRC) -- Crude oil futures were lower in mid-morning trade in Asia July 13 ahead of mid-week deliberations by OPEC+ over whether to maintain its current supply cut for another month, and as several countries reported a sharp rise in coronavirus infections, reported S&P Global.

At 11:04 am Singapore time (0304 GMT), ICE Brent September crude futures were down 44 cents/b (1.02%) from the July 10 settle at USD42.80/b, while the NYMEX August light sweet crude contract was 43 cents/b (1.06%) lower at USD40.12/b.

"The record high inventories in the US and a second wave contagion around the globe have added speculation that OPEC+ might yet throw a surprise decision this week by extending the 9.6 million b/d output cuts by a further month, but we think that is unlikely given how prices have almost doubled from lows in April," OCBC analysts said in a note July 13. "In the short term, we expect oil prices to remain within its consolidation phase," they added.

The OPEC+ Joint Ministerial Monitoring Committee will decide July 15 whether to extend 9.7 million b/d production cuts that expire end July by another month.

With major economies showing signs of recovery, sources familiar with the negotiations are indicating that an extension is unlikely, which will see OPEC+ moving ahead as planned to a 7.7 million b/d cut in August.

However, the US has reported more than 60,000 new coronavirus infections a day for the past four days, taking its total number of cases above 3.3 million, according to media reports. Brazil, India and South Africa have also reported an increase in cases, according to the World Health Organization.

The surging number of infections was likely to continue weighing on market sentiment as governments weigh the feasibility of further movement restrictions, clouding the near-term demand outlook.

Elsewhere, Libya, which holds Africa's largest crude reserves, lifted a force majeure on oil loadings July 10, but the Libyan National Army a day later vowed to maintain a blockade until its demands are met.

Crude production in Libya has been reduced to around 70, 000-100,000 b/d in recent months from more than 1.1 million b/d before the blockade was imposed in January. Any short term increase in crude exports from Libya is likely to "add another unwanted level of supply-side uncertainty at an extremely critical point in the oil price recovery phase," AxiCorp chief global markets analyst Stephen Innes said in a note July 13.

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 595,170 tonnes in the first five month of 2020, up by 10% year on year. Deliveries of all ethylene polymers, except for linear low density polyethylene (LLDPE), rose partially because of an increase in capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market was 457,930 tonnes in January-May 2020 (calculated by the formula production minus export plus import). Deliveris of exclusively PP random copolymer increased.
MRC

MOSCOW (MRC) -- Polypropylene (PP) imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports, according to MRC's DataScope report.

In June, Russian companies significantly raised their purchasing of PP in foreign markets partially because of a major increase in demand, imports were 20,000 tonnes versus 14,200 tonnes a month earlier. Thus, overall PP imports to Russia reached 105,300 tonnes in January-June 2020, compared to 86,800 tonnes a year earlier. Purchasing of all grades of propylene polymers in foreign markets increased, with homopolymer PP imports accounting for the most noticeable rise.

Overall, the structure of PP imports by grades looked the following way over the stated period.

June imports of homopolymer PP were 9,600 tonnes versus 4,900 tonnes a month earlier, PP shipments from Turkmenistan increased significantly. Thus, overall imports of homopolymer PP into the country totalled 43,600 tonnes in the first six months of 2020, compared to 28,600 tonnes a year earlier.

Last month's imports of propylene block-copolymers (PP block copolymers) were 5,200 tonnes versus 3,500 tonnes in May, demand for pipe grade PP increased from Russian companies. Imports of PP block copolymers into Russia reached 28,800 tonnes in January-June 2020, compared to 25,600 tonnes a year earlier.

June imports of statistical copolymers of propylene (PP random copolymer) dropped to 2,800 tonnes from 3,800 tonnes a month earlier, with pipes producers accounting for the main reduction in shipments due to higher prices in Europe. Overall imports of this grade of propylene copolymers were 17,400 tonnes in January-June 2020, compared to 15,100 tonnes a year earlier.

Imports of other propylene polymers totalled 15,500 tonnes over the stated period versus 17,400 tonnes a year earlier.

MRC

MOSCOW (MRC) -- Ukraine's polypropylene (PP) imports totalled about 61,100 tonnes in January-June of this year, down 8% year on year.
All PP grades accounted for the decrease in shipments, according to a MRC's DataScope report.

June imports rose to 13,400 tonnes against 8,700 tonnes a month earlier under the pressure of the seasonal factor and the relaxation of quarantine restrictions. Overall imports of propylene polymers reached 61,100 tonnes in January-June 2020, compared to 66,800 tonnes a year earlier. Demand for all grades of propylene polymers decreased, but propylene block copolymers (PP block copolymers) accounted for the largest reduction.

The structure of PP imports by grades looked the following way over the stated period.
June imports of homopolymers of propylene to the Ukrainian market grew to 10,900 tonnes from 6,600 tonnes a month earlier, local companies increased purchasing of homopolymer PP raffia in Russia and Azerbaijan. Total homopolymer PP imports were 47,900 tonnes in January-June, compared to 52,200 tonnes a year earlier.

June imports of PP block copolymers into the country amounted to a little more than 1,500 tonnes compared to 700 tonnes in May, local companies increased the volume of purchases of injection moulding polypropylene. Over the reporting period, about 5,700 tonnes of propylene block copolymers were imported against 6,400 tonnes for the same period in 2019.

June PP random copolymers imports decreased to 700 tonnes from 1,200 tonnes a month earlier, local companies decreased their purchasing of pipe and injection moulding PP random copolymers. Overall PP random copolymers imports reached 6,500 tonnes in January-June 2020, compared to 7,300 tonnes a year earlier.

Overall imports of other propylene copolymers totalled slightly over 900 tonnes over the stated period.

MRC