COVID-19 - News digest as of 31.07.2020

1.Crude oil futures steady to higher on a weaker US dollar

MOSCOW (MRC) -- Crude oil futures were steady to higher during mid-morning trade in Asia July 28 as a weaker US dollar boosted risk appetites and provide support for the global crude complex, as per S&P Global. NYMEX September WTI settled up 31 cents at USD41.60/b, and ICE September Brent was up 7 cents on the day at USD43.41/b. At 11:05 am Singapore time (0305 GMT), ICE Brent September crude futures was up 19 cents/b (0.44%) from the July 27 settle to USD43.60/b, while the NYMEX September light sweet crude contract was up by 6 cents/b (0.14%) at USD41.66/b. The US Dollar Index was at 93.64, down 0.02% from the close of the US trading session. The weaker US dollar is trading below the 94.0 level, its lowest since May 2018, continuing to boost investor appetite for risk assets, such as crude oil. With an upcoming Federal Open Market Committee meeting on July 28 and 29 where Federal Reserve chairman Jerome Powell is expected to express continued support for the Fed's dovish monetary policy, the decline in the US dollar is likely to continue, keeping oil prices buoyant. "Oil markets are receiving support from expectations of the FOMC's firmer commitment in the upcoming policy meeting towards allowing above-target inflation to occur for some time, which should be viewed as incredibly positive for risk assets. And oil prices will continue to draw support from the Fed's dovish policy, which sees the US dollar move lower," Stephen Innes, chief global markets analyst at AxiCorp, said in a note July 28. Meanwhile, the US' Senate Majority Leader McConnell had formally announced details of a newly proposed trillion-dollar fiscal stimulus package on July 27, which will provide most Americans with a one-time, $1,200 stimulus check and cut enhanced weekly unemployment benefits by two-thirds, from the current USD600 to about USD200 a week, according to media reports. Negotiations over the final details of the fiscal stimulus package will ensue just as the weekly USD600 unemployment benefits from the USD2.2 trillion Coronavirus Aid, Relief and Economic Security Act expires.


US May caustic soda exports fall on month as prices rise

MOSCOW (MRC) -- US caustic soda exports fell 23% in May from April, as prices rose compared with other major producing regions, reported S&P Gllobal with reference to the latest US International Trade Commission data,released in July.

The US exported 554,991 mt of caustic soda in April, down 2.6% from March as chlor-alkali rates fell to April's 68% from March's 90% on sharply lower demand for chlorine and downstream products made with it. Those products include construction staple polyvinyl chloride (PVC) and hydrochloric acid, used in oil and gas production, as construction and oil and gas activity cratered amid widespread global shutdowns to stem the spread of the coronavirus pandemic.

Caustic soda, a key feedstock in alumina and pulp and paper industries, is a byproduct of chlorine production.

However, as economies began reopening in May, caustic soda exports slid further despite industry data that showed chlor-alkali rates rebounded to 75%.

Market sources said the decline likely stemmed from buyers turning to imports from Asia and Europe, where prices for export material were lower than US pricing.

As MRC informed earlier, May production of sodium hydroxide (caustic soda) in Russia 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.

Sinopec Shanghai Petrochemical resumes production at HDPE plant

MOSCOW (MRC) -- Sinopec Shanghai Petrochemical has restarted its high density polyethylene (HDPE) unit in Shanghai, according to Apic-online.

A Polymerupdate source in China informed that, the company resumed operations at the unit on July 8, 2020. The unit was shut for brief maintenance on June 30, 2020.

Located at Shanghai in China, the unit has a production capacity of 260,000 mt/year.

As MRC reported earlier, Sinopec Shanghai Petrochemical took off-stream its HDPE plant on January 2, 2018 owing to technical issues. Further details of duration of shutdown could not be ascertained.

According to MRC's DataScope report, June HDPE imports to Russia decreased to 19,300 tonnes from 22,100 tonnes a month earlier on weaker shipments from Uzbekistan and Europe. Overall HDPE imports into the country totalled 147,400 tonnes in the first six months of 2020, down by 14% year on year. Film grade and pipe grade HDPE accounted for the greatest decrease in shipments.

China Petroleum & Chemical Corporation, or Sinopec Limited is a Chinese oil and gas company based in Beijing, China. It is listed in Hong Kong and also trades in Shanghai and New York . Sinopec is the worlds fifth biggest company by revenue.

HDPE price rise accelerated in July in Russia

MOSCOW (MRC) - After a long period of price decline, high density polyethylene (HDPE) prices began to rise in Russia at the end of June. The dynamics of price growth increased in the second half of July on a serious reduction in supply, according to the ICIS-MRC Price Report.

The long period of surplus and decline in HDPE prices in Russia ended in the second half of June. The weakening of the rouble and high prices of polyethylene in foreign markets forced some producers to increase export volumes in July, and imports also decreased. And these factors, in the context of seasonal growth in demand, led to a lack of HDPE supply in the market, followed by a dynamic rise in prices.

At the same time, some of the sellers have actually suspended all their polyethylene sales in the last two weeks. The rise in world prices of HDPE and the devaluation of the rouble against the dollar in June began to put pressure on imports, in the next month external supplies decreased even more.

At the same time, even in conditions of high prices, there are serious restrictions on sales from external suppliers in some segments, in particular, black pipe PE100. Serious price imbalance in the Russian market and in the markets in Asia, Turkey and Europe forced some domestic producers to increase their export volumes.

Export sales of extrusion grades of polyethylene increased. Demand for HDPE has begun to gradually recover in the Russian market since June after falling in April-May. And the growth in exports and the reduction in imports amid growing demand led to a serious reduction in supply.

Some sellers have begun to limit their sales since mid-July; in some cases, it was reported that sales were completely suspended due to lack of stocks. The situation with the balance of demand and supply of HDPE in the market was significantly worsened by the unplanned shutdown of part of Stavrolen's capacities at the end of last week. The greatest shortage remained in black PE 100 segment.

The market of injection moulding HDPE was more or less balanced. Negotiations on August delivery of HDPE have begun this week. Many suppliers announced an increase in prices.

Deals for film HDPE were discussed from Rb73,000/tonne CPT Moscow, including VAT. Price offers for blow moulding HDPE in some cases were heard at Rb79,500/tonne CPT Moscow, including VAT. At the same time, not all sellers began to discuss the August deliveries.

It should also be understood that Kazanorgsintez and Stavrolen intend to shut down their capacities in September-October for scheduled preventive maintenance.

Demand destruction, low margins squeeze Reliance petchem profit

MOSCOW (MRC) -- Reliance Industries says that its group net profit for the fiscal first quarter ended 30 June increased 30.6% compared with the same period of the prior year, to Rs132.48 billion Indian rupees (USD1.77 billion), said Chemweek.

The company recorded an exceptional gain of Rs49.66 billion from the divestment of shares in the Reliance BP Mobility Services Ltd. business. The company reports a 42% year-on-year (YOY) decline in sales, to Rs1.0 trillion. EBITDA decreased by 11.8% YOY to Rs215.85 billion because of a lower contribution from the oil-to-chemicals (O2C) business, which faced significant demand destruction and margin pressure across transportation fuels and the polyester chain, Reliance says.

“The severe demand destruction due to global lockdowns impacted our hydrocarbons business but the flexibility in our operations enabled us to operate at near-normal levels and deliver industry-leading results,” says Mukesh Ambani, chairman and managing director at Reliance.

Reliance’s petchem business saw a YOY decline in quarterly revenue of 33%, to Rs251.9 billion, primarily due to lower price realizations with disruptions in local and regional markets amid the COVID-19 outbreak. Quarterly EBITDA in the petchem sector plunged 49.7% YOY to Rs44.3 billion. Weak domestic demand and a higher share of exports weakened margins compared with regional benchmarks. This was partially offset by cost optimization and integration benefits, says Reliance.

Polyester-chain margins were weaker due to a decline in para-xylene (p-xylene) and purified terephthalic acid (PTA) margins with significant new supplies. Polyester-chain margins averaged USD540/metric ton compared with USD668/metric ton in the year-earlier quarter. With a sharp fall in feedstock prices, naphtha cracking economics improved vis-a-vis gas cracking, which aided polymer-chain margins, it adds. Polymer-chain margins averaged USD500/metric ton compared with USD471/metric ton in the year-earlier quarter.

The company says that it operated its plants on average at rates of more than 90% during India’s lockdown period. Reliance says that during the lockdown, it grew its petchem exports by more than 2.5 times in just two weeks.

Reliance earlier this month, during the company's annual shareholders' meeting, said that due to unforeseen circumstances in the energy market as well as COVID-19, its talks with Saudi Aramco to form a partnership for the O2C business had not progressed according to the original timeline. Reliance plans to approach the National Company Law Tribunal (Delhi, India) with a proposal to spin off its O2C business into a separate subsidiary to facilitate a partnership with Aramco.

Ambani said he expects the spin-off to be completed by early 2021 but did not provide a date for the partnership with Aramco, which was originally due to be completed in March 2020.

As MRC informed earlier, Reliance Industries says that due to unforeseen circumstances in the energy market as well as COVID-19, its talks with Saudi Aramco to form an oil-to-chemicals (O2C) partnership have not progressed according to the original timeline.

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.

Reliance Industries is one of the world's largest producers of polymers. Thus, the company produces among others polypropylene, polyethylene and polyvinyl chloride.