COVID-19 - News digest as of 24.07.2020

1. Sasol flags yet another delay at Lake Charles project after fire

MOSCOW (MRC) -- Sasol Ltd. warned of a further delay at its giant US chemicals project, pushing back the startup of the final unit by a couple of months, reported Bloomberg. The Lake Charles complex in Louisiana has been dogged by mismanagement and cost overruns, forcing the South African company to accelerate asset sales to reduce debt. The latest holdup follows a fire that damaged the site’s low-density polyethylene (LDPE) unit back in January. “The unit is expected to achieve beneficial operation before the end of October,” rather than “before September” as previously planned, Sasol said Thursday. “Challenges were experienced in the completion of the restoration process, resulting in a slight delay.” The company has piled on debt to develop the Lake Charles site, whose cost has risen sharply from early estimates to almost USD13 billion. Setbacks at the development, coupled with oil’s crash amid the coronavirus pandemic, have dragged Sasol’s shares down more than 50% this year. The stock slipped 1.5% on Thursday at 10:53 a.m. in Johannesburg.


Dow Chemical sees recovery starting for durable plastics amid pandemic

MOSCOW (MRC) -- Dow Chemical is seeing early signs of recovering demand in automotive, construction, furniture and bedding markets as economies worldwide emerge from widespread coronavirus pandemic-related shutdowns during the second quarter of 2020, reported S&P Global with reference to company executives' statement July 23.

The company has restarted two polyethylene plants in Texas and a third in Argentina that were shut in April to keep inventories in check amid low demand. Operating rates for the company's ethylene and PE facilities have rebounded to year-ago levels, CEO Jim Fitterling said during the company's second-quarter 2020 earnings call.

"If you go back to the beginning of the year, January, February, we were off to a rocking start," he said. "Then it was the economic shutdowns that really locked everything in during the months of March and April and May; April and May being the two worst. I would say operating rates, for us, on ethylene, polyethylene, right now, are pretty much like they were last year and the volumes are continuing to build."

However, Dow will deepen its cost reductions and slash 6% of its global workforce amid expectations of a gradual recovery. Dow reported a USD225 million net loss for Q2, compared with a USD75 million profit in the year-ago period.

Fitterling said the company continued to see strong demand in packaging and other single-use plastics, but such gains were overshadowed by weak demand for durable plastics in big-ticket items like vehicles and homes, as well as lower margins during Q2. Total volumes for packaging and specialty plastics were flat as gains in some regions could not offset excess supply and weak demand in the US and Canada, he said.

Chief Financial Officer Howard Ungerleider said the company expects continued robust demand from consumers for resins that make plastics used for food packaging, hygiene and health care items as well as the beginnings of a recovery in demand for more durable plastics.

A combination of industry planned and unplanned outages plus PE inventories hovering near five-year lows should tighten the market and support a 5 cents/lb price increase for domestic US material in July and August, Ungerleider said.

Fitterling also noted that recent economic indicators show that in June, US industrial production rose 5.4% and retail sales increased 7.5% from May. US housing starts also rose 17.3%,and were 4% under the June 2019 rate.

He said China's Q2 GDP was up 3.2% year over year, and Dow's China volumes rose 13% compared with the year-ago quarter.

"European and North American economies have been slower to recover, but began improving in June," he said. "Latin America remains challenged, but we expect them to follow a similar recovery pattern in the second half of the year."

As MRC informed before, as part of the company’s current slate of low capital intensity, high-return incremental growth investments, Dow announced in August 2019 that it will retrofit proprietary fluidized catalytic dehydrogenation (FCDh) technology into one of its mixed-feed crackers in Plaquemine, Louisiana, to produce on-purpose propylene.

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

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, 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.

The Dow Chemical Company is an American multinational chemical corporation. Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber.

Crude oil prices rise on coronavirus vaccine hopes

MOSCOW (MRC) -- Crude oil futures were higher in Asia afternoon trade July 23 as the market reacted positively to news of further developments in the race for a COVID-19 vaccine, after they slipped overnight following a bearish US stock build, reported S&P Global.

At 2:11 pm Singapore time (0611 GMT), ICE September Brent crude futures rose 13 cents/b (0.29%) from the July 22 settle at USD44.42/b, while the NYMEX September light sweet crude contract rose 13 cents/b (0.31%) at USD42.03/b.

"The US government had engaged drug maker Pfizer and co to mass produce vaccines as its COVID-19 vaccine candidate embarks on its late stage testing," said Pan Jingyi, market strategist at IG, in a note July 23.

"Although this will be contingent of the eventual success of the test results, it had nevertheless drawn the cheer from markets with hopes that a positive result here could finally alleviate some of the inconveniences brought about by COVID-19 and propel us towards normality," she added.

On July 22, the US government announced a USD1.95 billion contract with Pfizer and a German biotechnology company to supply 100 million doses of a vaccine by December, according to media reports.

Oil had initially slipped overnight July 22 on news of a US stock build. US crude oil inventories increased 4.9 million barrels to a total of 536.6 million barrels for the week ended July 17, according to the weekly inventory report by the US Energy Information Administration, released July 22.

However, new market developments in the Asian trading session, including that of the hunt for a vaccine, meant that prices have since clawed back some of their strength.

"Markets are steadying and reacting to the stimulus packages and positive signs from various COVID-19 related vaccine development programs," said Stephen Innes, chief global markets strategist at AxiCorp, in a note July 23.

That former point touched on a number of stimulus packages announced by governments in a bid to stem the economic fallout of COVID-19.

"In the US, the White House has also asked for more funds from the US Congress which the American President wants to be passed by the end of this month," said Avtar Sandu, senior manager, commodities at Phillip Futures, in a note July 23.

A previous deal passed by the US Congress in March for $2,400 a month in jobless benefits is set to expire at the end of July.

This comes after the EU agreed on a Eur750 billion package of grants and loans to help member states recover from the economic impact of COVID-19.

Separately, fresh US-China tensions have led to fears of a renewed trade dispute, which could hurt oil prices. However, analysts expected this to be unlikely.

"Geopolitical concerns have been set aside with energy markets sensing that a new US/China trade war, derailing the global recovery, (is) an unlikely outcome," said Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, in a note July 23.

As MRC wrote 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.

And 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 DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, 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.

CSPC reports unscheduled shutdown at No. 1 LLDPE unit

MOSCOW (MRC) -- CNOOC and Shell Petrochemicals Co (CSPC), has taken off-stream its No. 1 linear low density polyethylene (LLDPE) unit for unplanned maintenance, as per Apic-online.

A Polymerupdate source in China informed that, the company halted operations at the unit on July 17, 2020. The unit is likely to remain off-line for about one week.

Located in Giangdong province of China, the No. 1 LLDPE unit has a production capacity of 270,000 mt/year.

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.

CNOOC and Shell Petrochemicals Company Limited (CSPC) was established in late 2000. It has built and now operates a world-scale petrochemical complex in the Daya Bay Economic and Technological Development Zone, Huizhou, Guangdong Province. The joint venture partners are Shell Nanhai BV, a member of the Royal Dutch Shell Group, with a 50 per cent stake, and CNOOC Petrochemicals Investment Limited (CPIL), also with 50 per cent. CPIL is owned by China National Offshore Oil Corporation (CNOOC) (90%) and Guangdong Guangye Investment Group Company Limited(10%).

As an integrated petrochemical complex, the major facilities of the complex include 11 process units, steam and power generation and other utility provisions, storage and handling and shipping facilities, as well as environmental protection facilities. The heart of the complex is a world-scale cracker producing 950,000 tons per annum ethylene and 500,000 tons per annum propylene. In total, the complex produces some 2.7 million tons per annum of ethylene and propylene's derivative products to supply the domestic market.

Index of chemical production in Russia grew by 4.9% in H1 2020

MOSCOW (MRC) -- Russia's output of chemical products rose in June 2020 by 2.6% year on year. However, production of basic chemicals increased year on year by 4.9% in the first six 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-June. Production of benzene was 106,000 tonnes in June 2020, compared to 110,000 tonnes a month earlier. Overall output of this product reached 721,000 tonnes over the stated period, up by 3.9% year on year.

June production of sodium hydroxide (caustic soda) were 106,000 tonnes (100% of the basic substance) versus 112,000 tonnes a month earlier. Overall output of caustic soda totalled 649,000 tonnes in the first six months of 2020, up by 0.9% year on year.

2,032,000 tonnes of mineral fertilizers (in terms of 100% nutrients) were produced in June 2020 versus 2,283,000 tonnes a month earlier. Overall, Russian plants produced slightly less than 12,400,000 tonnes of fertilizers in January-June 2020, up by 3.5% year on year.

Last month's production of polymers in primary form fell to 791,000 tonnes from 820,000 tonnes in May partially because of a scheduled shutdown for maintenance at ZapSibNeftekhim.

Output of polymers in primary form totalled 4,900,000 tonnes over the stated period, up by 14.8% year on year.