Borealis net earnings decline, major project schedules to suffer slippage

MOSCOW (MRC) -- Borealis (Vienna, Austria) has reported a net profit of EUR64 million (USD76 million) for the second quarter of 2020, down 80% year on year (YOY), and says its major growth investment projects will suffer delays of between “a couple of weeks and a few months” due to the COVID-19 pandemic, reported Chemweek.

The company’s 625,000-metric tons/year steam cracker at Stenungsund, Sweden, is also expected to remain offline until the fourth quarter of this year, it says, following a fire in May that saw the unit shut down and force majeure declared.

Borealis says the lower earnings were driven mainly by a negative inventory value development due to lower oil prices, a reduced advantage from the use of light feedstock versus naphtha, and the unplanned cracker outage in Sweden. Net sales of EUR1.53 billion were down from EUR2.14 billion a year earlier, while total sales including its Borouge joint venture with Abu Dhabi National Oil Co. (Adnoc) declined 26% YOY to EUR1.89 billion.

The company says polyolefins sales volumes remained “relatively stable, even during the pandemic,” while the contribution from its fertilizer business was at the same level as a year earlier. Borouge recorded higher sales volumes YOY, but weaker polyolefin prices in Asia impacted earnings negatively, it says.

In an exclusive interview with CW this morning, Alfred Stern, CEO, and Mark Tonkens, CFO, discussed the progress of the company’s major growth projects, a positive outlook for the remainder of 2020, and the impending change in its ownership structure. The polyolefins industry in Europe has been impacted by COVID-19 and the oil price plunge since the end of the first quarter, but certain segments of the company’s portfolio are performing well, Stern says. This includes healthcare, parts of its consumer packaging business, and its fertilizers segment, “but our automotive business has not been spared the challenges experienced by many players in this industry,” he says. The resilience program launched by Borealis earlier this year to reduce costs and investments is helping to maintain positive results and strong cash flow during the pandemic, he says.

The company expects net profit to increase in the second half of 2020 compared to the first half, partly due to the “substantial inventory devaluation” it incurred in the second quarter that “will not happen” in the next six-month period, Tonkens says. Sales volumes in the quarter remain encouraging at almost the same level as last year despite the pandemic, while its light feedstocks advantage which “vanished” earlier in the second quarter is now returning, he says. “In June we started to see that coming back, to an extent,” he notes, adding that the company has built its feedstocks business to be flexible, “so we can react to different conditions.”

Borealis’ strong product portfolio during “a deep crisis like this” has been supported by a “good strategic set up” and the company’s ability to shift quickly from sectors with lower demand towards higher demand segments, Stern says.

The company remains committed to and continues to progress construction at its three major growth projects—the Kallo, Belgium, propane dehydrogenation (PDH) plant; its Baystar 50/50 JV with Total in the US; and the PP5 Borouge polypropylene (PP) project at Ruwais, Abu Dhabi—but the impact of the pandemic means “there will be a slide” in their schedules, according to Stern. “We are looking at delays ranging from a couple of weeks to a few months on these projects,” he says. The 750,000-metric tons/year PDH plant at Kallo was originally due online mid-2022 before that later shifted to nearer the end of the year, while the Baystar steam cracker and Borstar polyethylene (PE) plant are expected online in early 2021 and early 2022, respectively. Stern told CW in May it was “unrealistic” to expect the projects to be completed on time due to current circumstances.

Borealis expects to reach the next milestone before the end of this year on a potential USD4-billion PDH and PP project in India, in partnership with BASF, Adnoc, and the Adani Group, when it will then decide “how we can further proceed,” Stern says. The companies signed an agreement last year to carry out a joint feasibility study to evaluate the proposed complex at Mundra, India. Earlier this year Borealis pulled out of a proposed USD6.8-billion development for an integrated ethane cracker and PE project in Atyrau, Kazakhstan. “That was a pure business decision,” he says, based on the results of a feasibility study and a longer-term view that the opportunity was “not sufficient to invest such a huge amount.” Borealis said in May the company would reduce its 2020 capital expenditure by 25% to EUR750 million from the original plan.

On the agreed change in ownership arrangements by the company’s two shareholders, Mubadala (Abu Dhabi) and OMV (Vienna), for OMV to increase its share to 75% from 36% at present, Stern says the transaction is still expected to complete in the fourth quarter of this year. The ongoing focus on sustainability by both Borealis and OMV is expected to lead to “more opportunities on how we can work together,” in a circular economy, he says.

Stern also says that Borealis “is not in a rush” to find a potential partner or partners for its fertilizer business, but that “if the opportunity arises, then we would still be interested.” The fertilizer market in Europe “would benefit from more consolidation,” he says.

As MRC informed earlier, Borealis has maintained its cracker in Stenungsund (Sweden) offline longer than initially anticipated, after it was shut following a force majeure declaration at the site on May 11, 2020. Sources said that the unit has been offline longer than initially expected with no confirmed startup date. The Stenungsund cracker has an ethylene capacity of 625,000 tonnes and a propylene capacity of 150,000 mt/year.

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.

Borealis is a leading provider of innovative solutions in the fields of polyolefins, base chemicals and fertilizers. With headquarters in Vienna, Austria, Borealis currently employs around 6,500 and operates in over 120 countries.

Output of products from polymers in Russia up 1.3% in H1 2020

MOSCOW (MRC) -- After the May fall in June, Russia's output of products from polymers rose by 16.9% due to the easing of quarantine restrictions and seasonally stronger demand. However, this figure increased by 1.3% year on year in the first six months of 2020, reported MRC analysts.

According to the Russian Federal State Statistics Service, June production of unreinforced and non-combined films grew to 114,700 tonnes from 101,000 tonnes a month earlier. Output of films products rose in the first six months of 2020 by 10.7% year on year to 618,600 tonnes.

June production of non-porous boards, sheets and films went up to 36,200 tonnes from 33,000 tonnes in May. Thus, overall output of these products reached 196,700 tonnes in January-June 2020, up by 6.8% year on year.

June production of porous polymer boards, sheets and films was 27,900 tonnes, up by 25.1% month on month. Overall output of these products reached 135,100 tonnes in the first six months of 2020, compared to 124,000 tonnes a year earlier.

June production of plastic bottles and flasks fell to 1,801,000,000 items from 1,958,000,000 items a month earlier. Overall output of these plastic products totalled 10,720,000,000 units over the stated period, compared to 10,398,000,000 units a year earlier.

June production of polymer pipes, hoses and fittings was 64,500 tonnes versus 56,500 tonnes in May. Overall output of these products was 314,700 tonnes in January-June 2020, up by 16.2% year on year.

June production of sacks and bags from ethylene polymers reached 2,981,000,000 units, compared to 2,547,000,000 units a month earlier. Overall output of these plastic products totalled 14,657,000,000 units in the first six months of 2020, compared to 11,955,000,000 units a year earlier.

June production of linoleum and floor coverings was 15,400,000 square metres, compared to 8,600,000 square metres a month earlier. Overall output of these products totalled 64,000,000 square metres over the stated period versus 67,600,000 square metres a year earlier.

June production of plastic windows and door blocks reached 2,391,000 square metres and 85,600 square metres, respectively, versus 1,816,000 square metres and 69,200 square metres a month earlier. Overall output of these plastic products totalled 11,253,000 square metres and 416,000 square metres, respectively, compared to 9,885,000 square metres and 427,300 square metres a year earlier.

European producers do not plan to raise PVC prices for CIS markets

MOSOCW (MRC) -- Negotiations on prices of European polyvinyl chloride (PVC) for August shipments to the CIS markets started at the beginning of the week. The rise in the cost of ethylene in Europe has been going on for the third month in a row, but not all producers plan to increase export prices for PVC, according to the ICIS-MRC Price Report.

August contract price of ethylene was agreed up by EUR21/tonne from the previous month, which theoretically allows to talk about an increase of EUR11/tonne in net cost of PVC. Nevertheless, the offers from European producer for August export prices of PVC for CIS markets have been mixed. Both the increase in export prices of PVC for shipments in August and the roll over of the July ones are being discussed.

The demand for PVC from consumers from the CIS countries has remained at a good level in the last two months due to the seasonal factor, while the possibilities of local producers were limited, including due to scheduled shutdowns.
The situation is similar in Europe in the PVC market.

Scheduled maintenance works and good demand from both the domestic market and a number of export markets significantly limited the supply for a number of European producers. Some producers do not intend to carry out their shipments to the markets of the CIS countries in August.

Overall, deals for August shipments of suspension polyvinyl chloride (SPVC) to the CIS markets were negotiated in the range of EUR665-720/tonne FCA, whereas last month's deals were done in the range of EUR660-720/tonne FCA.

Nan Ya Plastics conducts maintenance at No. 1 MEG plant in Taiwan

MOSCOW (MRC) -- Nan Ya Plastics, part of Formosa Petrochemical, has shut its No. 1 monoethylene glycol (MEG) unit at Mailiao on 8 July for a catalyst change, reported S&P Global with reference to a company source.

The 360,000 mt/year plant is expected to be bought back on-line on 13 August, 2020.

The company's 360,000 mt/year No. 2 MEG unit will undergo a month-long overhaul after the No. 1 MEG plant restarts, and the 360,000 mt/year No. 3 plant will undergo a turnaround from mid-August, the company source added.

As MRC informed before, Nan Ya's 800,000 mt/year MEG plant in Texas is expected to come online by late 2020 or early 2021 rather than the third quarter of 2020. According to Formosa Plastics USA, Nan Ya suspended construction on the project at Formosa's Point Comfort, Texas, complex in March on coronavirus pandemic-related concerns to ensure worker safety and social distancing. The company has not publicly disclosed a new startup timeline. The facility's startup was originally expected to come in the first half of this year, and later pushed back to Q3.

MEG is one of the main feedstocks for the production of polyethylene terephthalate (PET).

According to MRC's ScanPlast report, Russia's estimated PET consumption totalled 367,720 tonnes in the first six months of 2020, up by 19% year on year. Russian companies processed 62,910 tonnes of material in June.

Formosa Petrochemical is involved primarily in the business of refining crude oil, selling refined petroleum products and producing and selling olefins (including ethylene, propylene, butadiene and BTX) from its naphtha cracking operations. Formosa Petrochemical is also the largest olefins producer in Taiwan and its olefins products are mostly sold to companies within the Formosa Group. Among the company's chemical products are paraxylene (PX), phenyl ethylene, acetone and pure terephthalic acid (PTA). The company's plastic products include acrylonitrile butadiene styrene (ABS) resins, polystyrene (PS), polypropylene (PP) and panlite (PC).

COVID-19 - News digest as of 06.08.2020

1. U.S. specialty chemical markets strengthen in June

MOSCOW (MRC) -- The American Chemistry Council (ACC) reported that with continued recovery in the U.S. economy, specialty chemicals market volumes increased by 3.6 percent in June, an improvement from the revised 1.2 percent gain in May and the record 12.6 percent decline in April, said Americanchemistry. Of the 28 specialty chemical segments that ACC monitors, 25 expanded in June, an improvement from the expansion in 22 segments in May and the decline across all segments in April. On a sequential basis, diffusion was 89 percent, an improvement from 79 percent in May and 0 percent in April. In June, 23 segments featured gains of more than 1.0 percent.