COVID-19 - News digest as of 10.08.2020

1.CIA says majority of UK chemical companies expect improved stability, sales in third quarter

MOSCOW (MRC) -- A survey of UK chemical companies has revealed that 80% expect improved stability and a rise in domestic and international export sales over the next three months, with over 70% also seeing the same upward trend for exports to the EU, despite significant uncertainty remaining, said Chemweek. The survey of its member companies by the Chemical Industries Association (CIA; London, UK) shows the majority also expect to see an improvement in capital expenditure, although around 10% of companies expect job losses and a reduction in R&D expenditure. The decline in industry sales came to a halt in the second quarter of 2020, with half of the companies surveyed now reporting “stability or improvement,” the CIA says. Exports to the EU and the rest of the world remained at current levels or improved during the quarter for half of those surveyed, as did capex and business utilization, it says. Stability and growth in employee numbers during the quarter, as well as spending on R&D, was reported by 80% of companies contacted, it adds.




MRC

Chemical activity barometer rises in July

MOSCOW (MRC) -- The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 2.7 percent in July on a three-month moving average (3MMA) basis following a 0.1 percent gain in June. On a year-over-year (Y/Y) basis, the barometer fell 8.9 percent in July, said Americanchemistry.

The unadjusted data show a 1.3 percent gain in July following a 3.4 percent gain in June and a 3.6 percent gain in May. The diffusion index rose to 41 percent. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for June was revised upward by 1.36 points and the May reading was revised upward by 1.40 points.

"With three consecutive months of gains, the latest CAB reading is consistent with recovery in the U.S. economy," said Kevin Swift, chief economist at ACC. The CAB has four main components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators.

Production-related indicators were mixed in July. Despite improvement in new home sales, housing starts and building permits, trends in construction-related resins, pigments and related performance chemistry were soft. Reflecting a recovery in light vehicles and other industries, resins and chemistry used in durable goods were mixed. Plastic resins used in packaging and for consumer and institutional applications were mixed. Performance chemistry strengthened, while U.S. exports were mixed. Equity prices gained, and product and input prices strengthened. Inventory and other supply chain indicators turned positive.

The CAB is a leading economic indicator derived from a composite index of chemical industry activity. Due to its early position in the supply chain, chemical industry activity has been found to consistently lead the U.S. economy’s business cycle, and the barometer can be used to determine turning points and likely trends in the broader economy. Month-to-month movements can be volatile, so a three-month moving average of the CAB reading is provided. This provides a more consistent and illustrative picture of national economic trends.

Applying the CAB back to 1912, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.

As MRC informed earlier, 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 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.
MRC

Lotte Chemical earnings plunge on lower sales, prices, forecasts upturn in third quarter

MOSCOW (MRC) -- Lotte Chemical said Friday its second-quarter net profit fell 88.7 percent from a year earlier due to low demand amid the coronavirus pandemic, said Koreantimes.

For the April-June period, Lotte Chemical posted a net profit of 30.6 billion won (USD25.8 million), compared with a profit of 271.2 billion won a year earlier, the company said in a regulatory filing.

Lotte Chemical said the decreased profit is blamed on lower prices of its major products due to slowing demand in the markets amid increased uncertainty over the COVID-19 pandemic and trade disputes between the United States and China.

Lotte Chemical's operating profit plunged 90.5 percent year-on-year to 32.9 billion won in the second quarter. Sales fell 32.1 percent to 2.68 trillion won from 3.94 trillion won during the same period, it said.

Shares in Lotte Chemical fell 2.51 percent to 174,500 won, underperforming the broader KOSPI's 0.48 percent gain. Lotte Chemical manufactures a wide range of petrochemical products, including polymers, monomers, basic petrochemicals, construction and interior materials.

Lotte Chemical is a petrochemical unit of Lotte Group, a South Korean retail-to-chemicals conglomerate. Kumho Petro Chemical reported its second-quarter net income of 99.8 billion won, down 13.4 percent from a year earlier.

The company said in a regulatory filing that operating income for the April-June period fell 13 percent year-on-year to 120.1 billion won. Revenue decreased 20.6 percent to 1.02 trillion won. (Yonhap).

We remind that, as MRC informed before, Lotte Chemical Titan Holding (Kuala Lumpur, Malaysia), an affiliate of Lotte Chemical (Seoul, South Korea), announced that the group's ethane cracker and ethylene glycol (EG) plant at Lake Charles, Louisiana, commenced commercial operations in August, 2019. Lotte Chemical USA, a 40/60 joint venture (JV) between Lotte Chemical Titan and Lotte Chemical, holds the Lotte group's stakes in the plants. The USD3.1-billion ethane cracker is an 88/12 JV between Lotte Chemical USA and Axiall, a subsidiary of Westlake Chemical. Lotte has invested about USD1.9 billion in the JV. Lotte Chemical USA owns 100% of the EG plant.

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.
MRC

Lukoil Q2 oil production down 11.6% on year to 1.52 mil b/d

MOSCOW (MRC) -- Russia's second largest crude producer, Lukoil, said Aug. 7 that its oil production, excluding the West Qurna 2 project, fell to 18.82 million mt in the second quarter, in line with deeper cuts under the OPEC+ agreement, reported S&P Global.

This is equivalent to an average of around 1.52 million b/d, down 11.6% on the year and 12% on the quarter.
From May, Russian producers including Lukoil were subject to the strictest output restrictions so far under the OPEC+ agreement as the group attempted to ease market volatility caused by the coronavirus pandemic. The cuts are being eased from Aug. 1.

Output restrictions were also reflected in Lukoil's production in the first half of the year, which was 40.2 million mt, equivalent to an average of around 1.62 million b/d. This was down 5.6% on the year.

Hydrocarbon output averaged 1.98 million boe/d in Q2, down 14.8% on the year, and 15% on the quarter. Hydrocarbon production in H1 fell 8.4% to average 2.155 million boe/d.

"The cut was due to the new OPEC+ agreement and a decrease in gas supply from Uzbekistan to China that were driven by the negative impact of the COVID-19 pandemic on hydrocarbon demand," Lukoil said in a statement.

Lukoil's gas output totaled 6.396 Bcm in Q2, down 23.6% on the year and 24% on the quarter.

Total gas production in H1 fell 14.7% year on year to 14.8 Bcm.

The company's Q2 refining throughput fell 19.6% on the year, and 20.8% on the quarter to 13.525 million mt.

Refining in H1 fell 8.6% to 30.6 million mt.

"The decline was due to scheduled maintenance work and throughput optimization at some of the company's refineries Q2 2020 because of lower demand for petroleum products and a fall in refining margins due to the COVID-19 pandemic," Lukoil said.

As MRC wrote before, the European refineries of Russia’s No.2 oil producer Lukoil were only processing Russian oil in H2 April-early May, 2020.

We remind that Stavrolen (part of Lukoil), Russia's major polyolefins producer, resumed its polypropylene (PP) production in Budennovsk after a long scheduled turnaround. The plant's customers said Stavrolen had fully resumed its PP production after the long scheduled maintenance by 15 October 2019. The outage began on 6 September. The start-up of the plant"s high density polyethylene (HDPE) production took place with a week delay.

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.

Lukoil is one of the leading vertically integrated oil company in Russia. The main activities of the company include operations for exploration and production of oil and gas, production and sale of petroleum products. Lukoil is the second largest private oil Company worldwide by proven hydrocarbon reserves. Lukoil's structure includes one of the largest Russian petrochemical plant - Stavrolen.
MRC

Crude oil futures retreat after overnight rally, steady US dollar

MOSCOW (MRC) -- Crude oil futures were lower during mid-morning trade in Asia Aug. 4 as traders took profit after the overnight rally amid better-than-expected global economic data, reported S&P Global.

At 11:07 am Singapore time (0307 GMT), the ICE Brent October crude futures was down 30 cents/b (0.68%) from the August 3 settle at USD43.85/b, while NYMEX September light sweet crude contract was down by 27 cents/b (0.66%) at USD40.74/b.

In the US, IHS Markit July manufacturing PMI released on Aug. 3 stood at 50.9, an improvement from June's 49.8, while the Institute of Supply Management's manufacturing PMI rose to 54.2% in July, up from 52.6% in June, exceeding market expectations.

"However, when it comes to manufacturing output, it continues to suggest it's easier for the central bank and government stimulus to fire up the industrial heartlands," Stephen Innes, chief global markets analyst at AxiCorp, said in an Aug. 4 note.

"Still, it remains a challenge to get people working again or even in some US states to leave their apartment," he added.

Meanwhile, even as the number of new COVID-19 cases in the US has continued to move lower for a fifth consecutive day, from a high of 70,800 cases on July 29 to 47,500 cases on Aug. 2, according to latest data from John Hopkins University, deaths from COVID-19 rose for the fourth week in a row, according to media reports.

On the supply front, with OPEC+ easing into a 7.7 million b/d production cut in August and returning production limited to 1.1 million-1.5 million b/d because of compensation cuts, this increase in global oil supply comes at a time when uncertainty around global demand recovery remains elevated.

"In the larger scheme of things, crude prices have become locked in a tight range and that may remain the case as fundamentally, not much is expected to change on the supply or the demand front," Vandana Hari, founder and CEO of oil consultancy firm, Vanda Insights, said Aug. 4.

"On an intraday basis, bargain-hunting buying or profit-taking shaves off the shallow troughs and peaks. The US dollar, which has been a major influence on crude prices, has also gone into a holding pattern this week. We may see sideway movements in crude unless the US weekly stocks data jolts them out of the current range," she added.

At 11:05 am (0305 GMT), the US dollar index stood at 93.463, down 0.05% from 93.507 at the close.

Market participants will look to fresh cues from the inventory reports by the American Petroleum Institute and the Energy Information Administration on Aug. 4 and 5, respectively.

As MRC informed before, China's crude stockpiles reached a record high level in July as refiners struggle to digest mass crude oil cargoes purchased during the second quarter, while domestic fuel consumption slowed amid widespread flooding across 23 provinces during the month. In total, at least 20 state-owned refineries across the country, which have no maintenance plan, have cut run rates in July by 1-17 percentage points from June. These comprise seven refineries under PetroChina, 12 from Sinopec, and Sinochem's only refinery Quanzhou Petrochemical.

We remind that Sinopec SABIC Tianjin Petrochemical Co. (SSTPC), a 50-50 joint venture of Sinopec and SABIC, completed the debottlenecking of its ethylene cracker on 11 July 2020, adding another 30,000 tons/year output to its current capacity. Followed the expansion, the Tianjin based plant become the country's largest compressor unit, producing 1.3 million tons of ethylene annually.

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.
MRC