Sabic profits rise on higher prices, volumes, reversal of Clariant impairment charges

MOSCOW (MRC) -- Sabic reports a net profit of 1.09 billion Saudi riyals (USD290 million) for the third quarter, a 47% rise year on year (YOY), due to higher product prices, increased sales volumes, and improved margins, according to Chemweek.

Sales declined 11% to SR29.30 billion compared with the prior-year period, with EBITDA down 26% YOY to SR5.67 billion.

Improved economic activity in the third quarter and an average Brent crude oil price up 50% compared with the second quarter were reflected in the improved product prices, volumes, and margins, says Sabic CEO Yousef al-Benyan. Sales volumes were 8% higher compared with the second quarter and average selling prices rose 11% quarter on quarter, although feedstock costs also increased with the average price of naphtha increasing 45%. Sales and EBITDA rose 19% and 62%, respectively, compared with the second quarter, when Sabic reported a net loss of SR2.22 billion. Sabic says its firm commitment to cost control resulted in EBITDA margins of 19% for the third quarter, up from 14% in the second quarter.

The company has also reversed write-downs related to Clariant, which offset some impairments in other assets. This resulted in non-recurring gains in the quarter of SR690 million “primarily due to the reversal of impairment provisions associated with Clariant,” compared with non-recurring charges of SR1.18 billion recorded in the second quarter, it says. Sabic holds a 31.5% stake in Clariant.

Sabic is maintaining its 2020 outlook, with global GDP expected to contract this year before an improvement is seen in 2021, says Benyan. “However, even without the COVID-19 impact, supply still exceeds demand for our key products, which will continue to pressure product prices and margins for the foreseeable future,” he says.

The implementation phase of Sabic’s alignment as the chemical arm of Saudi Aramco also got under way in the third quarter, “positioning it well to achieve long-term growth and to create and deliver value for its stakeholders,” according to the company. The portfolios of the two companies “complement one another, and we are both global organizations with a deep understanding of the worldwide marketplace,” Benyan says.

Sabic marketed a USD1.0-billion dual-tranche bond offering in September on the Taiwan stock exchange, demonstrating the company’s “agility and robustness to market conditions and its attractiveness for a diverse investor base looking for different tenors, which stimulated demand and drove favorable prices,” he says. The company also remains “committed” to driving sustainability forward in the chemicals industry, he adds.

In its petrochemicals business unit, Sabic’s largest, the company reports third-quarter sales of SR25.55 billion, up 20% on the second quarter. Average selling prices rose 13% and sales volumes were up 7% compared with the previous quarter, it says. EBITDA was up 63% compared with the second quarter at SR5.31 billion. Ethylene glycol (EG) prices improved in the third quarter due to a reduction in supply coupled with an improvement in demand, especially in polyester and polyethylene terephthalate (PET) bottle resin across regions, it says. Methanol demand also began recovering in the third quarter. In its polyethylene (PE) unit, prices rose in the third quarter, supported by steady demand and better macroeconomics conditions, according to Sabic. Polypropylene (PP) prices also improved compared with the previous quarter, supported by healthier demand from automotive and steady demand for applications such as personal hygiene, it says. Polycarbonate prices also rose in Asia following an increase in feedstock prices, it adds. “Demand for automotive, construction, and electrical appliances improved from the low levels observed in the second quarter of 2020. However, an increase in demand may be offset by increased supply from announced capacity additions,” Sabic says.

The company’s agri-nutrients business saw sales slip 1% to SR1.57 billion compared with the previous quarter, driven by a 5% fall in sales volumes that offset a 4% increase in average selling prices. Urea prices increased in the quarter due to tighter supply-and-demand balances, with favorable farming conditions across multiple regions, it says. Demand improved in India, Southeast Asia, and South America, and outages in the Middle East, Southeast Asia, and the Black Sea/Baltic region tightened supply, Sabic says.

Earlier this month Sabic and Aramco announced plans to expand the scope of their proposed joint crude-oil-to-chemicals project in Saudi Arabia, with the project now to include the integration of the existing Yanbu complex. Sabic earlier this year suspended all capital expenditure (capex) except nondiscretionary capex for safe and reliable operations and late-stage projects.

As MRC reported earlier, Saudi Aramco and Saudi Basic Industries Corporation (SABIC) have decided to reevaluate their crude-oil-to-chemicals project in Yanbu on the kingdom's west coast, according to an Oct. 18 statement on the Tadawul stock exchange, as they slash spending due to low prices. The USD20 billion project may be downsized to use Aramco's existing facilities in the port city, instead of building a new plant, the statement posted by SABIC said. "Both parties intend to re-evaluate the scope of the crude-oil-to-chemicals (COTC) complex project and study the integration of Saudi Aramco's existing refineries in Yanbu with a world-scale mixed feed steam cracker and downstream olefin derivative units," the statement said.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Saudi Basic Industries Corporation (Sabic) ranks among the world's top petrochemical companies. The company is among the world's market leaders in the production of polyethylene, polypropylene and other advanced thermoplastics, glycols, methanol and fertilizers.
MRC

MOSCOW (MRC) -- Abu Dhabi National Oil Company (ADNOC), UAE’s biggest energy producer, is seeking Indian companies for partnership in its ambitious USD 45 billion downstream petrochemical expansion plans, said Chemweek.

ADNOC CEO Sultan Ahmed Al Jaber, during a virtual session Prime Minister Narendra Modi had with global energy chief executives on Monday evening, sought opportunities to strengthen the UAE-India energy relationships, a company statement said. Speaking at the roundtable, Al Jaber said India has always been and will always remain one of the UAE’s closest friends and one of its most important trading partners.

Strategic ties between the two nations, he said, have strengthened in recent years, particularly in the field of energy. Indian companies are present in UAE oilfield concession, he said referring to ONGC Videsh Ltd and its partners in 2018 acquiring a 10 per cent in a large offshore oilfield for USD 600 million. This was the first time any Indian company set foot in the oil-rich Emirate. “As we continue to work together, I see significant new opportunities for enhanced partnerships, particularly across our downstream portfolio. As you know, we have launched an ambitious plan to expand our chemicals, petrochemicals, derivatives and industrial base in Abu Dhabi and I look forward to exploring partnerships with even more Indian companies across our hydrocarbon value chain,” Al Jaber said.

ADNOC in 2018 unveiled plans to invest USD 45 billion with partners to develop its local downstream activities, including the expansion of its Ruwais refinery and petrochemical capacity in the industrial hub. The company has courted international investors to expand its oil and gas production and monetise its assets. “India’s remarkable growth as an economic power has cemented its place as one of the world’s largest energy consumers.

“In fact, it represents the second biggest market for ADNOC. This is a position we hope to build on, in line with the huge expansion of India’s ambitions for growth,” Al Jaber said. ADNOC, he said, is ready to meet India’s growing demand across the full portfolio of products. He added ADNOC is proud to be a key supplier to India’s Strategic Petroleum Reserves and is keen to expand the commercial scale and scope of this strategic reserves partnership.
ADNOC was the first foreign company to hire space at the underground crude oil storage India has built as an insurance against supply and price disruptions.

"In the past two years, ADNOC has enhanced its strategic energy links with India a key growth market for crude, refined and petrochemical products. In addition to its partnership in the strategic reserves program, ADNOC is also a stakeholder in one of India’s largest refinery and petrochemical projects, to be constructed on India’s west coast,” he said.

ADNOC along with Saudi Aramco have together taken a 50 per cent interest in the massive 60 million tonnes a year refinery-cum-petrochemical complex planned on Maharashtra coast at a cost of USD 44 billion. Concluding his remarks, Al Jaber said he believes both countries have only scratched the surface of the opportunities that could benefit both India and the UAE in the energy sector, the statement said.

As MRC informed earlier, ADNOC Onshore, a subsidiary of ADNOC, awarded the three contracts which will see the procurement and construction of flowlines and wellhead installations across several onshore oil fields in the Emirate of Abu Dhabi. The contracts also include the engineering, procurement, and construction (EPC) of a new bypass system to provide critical backup for the existing crude receiving stations at the Jebel Dhanna and Fujairah export terminals.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

MRC

MOSCOW (MRC) -- Merck will invest 20 million euros (USD23.6 million) in and around Pyeongtaek, Gyeonggi Province, to increase its organic light-emitting diode manufacturing capabilities, the company said.

The 20 million euros will be used to establish a modular production system for an additional OLED sublimation purification facility, and expand its OLED manufacturing facility in the neighboring county of Poseung-eup. OLED sublimation purification is a key step that ensures top-level OLED quality and lifespan. An increase in such production capacity will prepare Merck for a rise in demand in the OLED market. Bigger manufacturing capacity will reinforce Merck’s role as a supplier of high purity OLED materials to Asia‘s panel makers, Merck forecasts.

“We are proud to announce a new investment of 20 million euros to produce the most advanced OLED materials here at Pyeongtaek to ensure fast delivery to our Korean customers,” said Kai Beckmann, member of the executive board of Merck and CEO of Performance Materials. “We are well aware that OLED materials have been defined as key materials by the Korean government. Likewise, Merck wants to increase Korea’s competitiveness in the display industry. We see our investment as a contribution to creating an agile supply chain for our customers in Korea,” Beckmann said.

Gyeonggi Province is an ideal location for Merck’s investment, said Kim Woo-kyu, managing director of Merck Korea, because of its proximity to Merck‘s major customers. Gyeonggi is well-positioned for innovative production as well as having excellent human resources, small and medium-sized enterprises and universities, Kim said.

Merck has been growing its high purity OLED manufacturing prowess in Asia in response to new form factors such as foldable and rollable displays. The company has a history of OLED research of over three decades, becoming one of the pioneers of OLED material technologies.

We remind that Merck celebrated the opening of its new packaging center at the science and technology company’s headquarters in Darmstadt, Germany, in October, 2018. The new 161,458-square-foot facility is dedicated to the packaging and shipping of Merck’s current portfolio of pharma medicines in more than 90 countries and help meet increasing patient needs for flagship medicines Glucophage, Concor and Euthyrox in the areas of diabetes, cardiovascular diseases and thyroid disorders respectively. It will also provide capacity for potential future pharma products currently in clinical development such as evobrutinib in the area of neurology-immunology or tepotinib in the area of oncology.

We remind that Russia's output of chemical products rose in September 2020 by 6.7% year on year. At the same time, production of basic chemicals increased by 6.1% year on year in the first nine 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 January-September output. Last month's production of primary polymers decreased to 852,000 tonnes from 888,000 tonnes in August due to shutdowns in Tomsk, Ufa and Kazan. Overall output of polymers in primary form totalled 7,480,000 tonnes over the stated period, up by 16.4% year on year.

Headquartered in Darmstadt, Germany, Merck opened an OLED application center in Pyeongtaek, Korea, in 2015. Merck Korea now has 11 operation sites and some 1,200 employees and operates businesses in functional materials, health care and life sciences. The functional materials business encompasses advance materials for information technology products such as displays and semiconductors. It also includes cosmetics and paints for automobiles.
Its health care business involves pharmaceuticals and medical devices for treatments of cancer, multiple sclerosis and infertility. The life sciences business deals in an extensive portfolio of over 300,000 products used for protein research, cell biology, antibodies, water purification and microbiome tests.
MRC

MOSCOW (MRC) -- South Korea’s S-Oil Corp said on Wednesday refining margins are expected to improve in the fourth quarter, supported by increased demand for kerosene and diesel ahead of the winter season, said Reuters.

“However, the rebound would be limited due to re-spread of COVID-19,” said the country’s third-largest refiner, whose main shareholder is Saudi Aramco, in an earnings statement. It had conducted an unplanned maintenance for its No. 2 residue fluid catalytic cracker, with 76,000 barrels per day (bpd) capacity, impacted by a typhoon in September, the company said in a conference call.

Sources had previously told Reuters the unit’s outage following typhoon Haishen had briefly lifted petrol margins. Opportunity cost lost by the shutdown was about 20 billion won, an executive said. The company plans to maintain run rate of around 80% for petrochemicals in the current quarter, while staying at the near-maximum level for the refining sector.

S-Oil expects its capital expenditure in 2021 to be at or below this year’s level as the company cannot predict its performance next year. S-Oil reported an operating loss of 9.3 billion won (USD8.25 million) for the third quarter, compared with a 231 billion won profit a year earlier but improving from a 164 billion won loss in the second quarter due to gradual demand recovery.

This was its third consecutive quarter of operating loss. Inventory-related gain was 133 billion won in July-September quarter, compared with a loss of 171 billion won in the previous quarter, it said. The company said it operated its 669,000 bpd CDUs in the southeastern city of Ulsan at 90.7% capacity on average in the July-September period, down from 99.8% in the second quarter. Shares of S-Oil were trading down 0.4% as of 0238 GMT, while the wider market was trading 0.2% lower.

As MRC informed earlier, on 4 October 4, S-Oil resumed propylene production at its Catcracking Unit N2 in Onsan (Onsan, South Korea). This plant with a capacity of 705,000 tonnes of propylene per year was closed on 7 September this year due to Typhoon Haishen (Super Typhoon Haishen).

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,496,500 tonnes in the first eight months of 2020, up by 5% year on year. Shipments of all ethylene polymers increased, except for linear low desnity polyethylene (LLDPE). At the same time, PP shipments to the Russian market reached 767,2900 tonnes in the eight months of 2020 (calculated using the formula - production minus exports plus imports - and not counting producers' inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.
MRC

MOSCOW (MRC) -- Imports of polyethylene (PE) into Russia fell by 15% year on year to 475,100 tonnes in January-September 2020. High density polyethylene (HDPE) accounted for the greatest decrease in imports, according to MRC's DataScope report.

September PE imports dropped to 46,100 tonnes from 49,500 tonnes a month earlier, with low density polyethylene (LDPE) accounting for the main decrease in imports. Overall imports of ethylene polymers totalled 475,100 tonnes in the first nine months of 2020, compared to 562,100 tonnes a year earlier. Shipments of LDPE and other ethylene copolymers increased, whereas imports of other grades of ethylene polymers decreased.

The structure of PE imports to Russia by grades looked the following way over the stated period.

September HDPE imports were 18,600 tonnes, which corresponds to the figure a month earlier. Overall imports of this PE grade totalled 202,500 tonnes in January-September 2020, down by 27% year on year. The largest decrease in supplies was due to film and pipe HDPE.

Last month's LDPE imports fell to 8,900 tonnes from 11,400 tonnes in August. Overall LDPE imports to Russia reached 83,300 tonnes in the first nine months of 2020, up by 8% year on year.

September linear low density polyethylene (LLDPE) imports reached 10,700 tonnes versus 11,300 tonnes a month earlier, local films producers reduces their purchases from the USA. Overall LLDPE imports totalled 118,300 tonnes in the first nine months of 2020, down by 13% year on year.

Last month's imports of other ethylene polymers, including ethylene-vinyl-acetate (EVA), were 7,900 tonnes, compared to 8,100 tonnes in August. Overall imports of other ethylene polymers reached 71,100 tonnes over the stated period versus 70,600 tonnes a year earlier.

MRC