South Korean refiners to embrace Saudi crude amid market uncertainty

MOSCOW (MRC) -- South Korea would heavily favor Saudi crude oil over US or other arbitrage barrels for the rest of the year as local refiners find their staple medium sour Middle Eastern crude to be the most viable and economical feedstock option in times of volatile refining margins and tepid consumer fuel demand, according to S&P Global.

South Korea made rigorous efforts to diversify its crude import sources over the past several years, with the share of Middle Eastern crude in its yearly procurement basket falling below 71% in 2019, compared with more than 85% in 2015.

However, Asia's fourth biggest oil consumer made a U-turn on its refinery feedstock diversification strategy in 2020.

South Korea's crude imports from Saudi Arabia in September climbed 8.3% from a year earlier at 23.1 million barrels, according to data from state-run Korea National Oil Corp. released Oct. 26.

The country's overall crude imports over January-September fell 7.8% year on year at 744.13 million barrels, but its Saudi crude imports rose 3.7% during the first nine months at 238.66 million barrels.

The low oil price environment and volatile refined product cracks prompted South Korean refiners to increasingly return focus to Middle Eastern crude, the feedstock that the companies are most comfortable with, said trading managers at SK Innovation, GS Caltex and Hyundai Oilbank.

As South Korean refiners continue to take the more safe and familiar feedstock procurement options in times of heightened market uncertainties, there's little room to explore arbitrage barrels, according to a market research manager at Korea Petroleum Association based in Seoul.

The country was Asia's biggest US crude customer in 2019. However, South Korean refiners imported 8.267 million barrels of US crude in September, down 34.4% from a year earlier and marking the fifth consecutive monthly decline, the KNOC data showed.

South Korean refiners are expected to continue to embrace Saudi crude in the coming trading cycles as Saudi Aramco maintains relatively attractive official selling prices.

Middle Eastern producers have been seen regularly cutting their monthly OSPs in 2020 and the attractive Persian Gulf OSPs appealed to many refiners grappling with tepid refining margins since the COVID-19 outbreak, the trading managers told S&P Global Platts.

South Korean refiners paid an average outright price of USD43.82/b for Saudi crude imported so far this year, sharply lower than USD53.91/b paid for the shipments from the US, USD45.83/b from Mexico and USD50.53/b from Kazakhstan, the KNOC data showed.

KNOC's import cost figures include freight, insurance, tax and other administrative and port charges.

"Light sweet US crude used to come cheaper than Saudi or any other Middle Eastern crude oil despite WTI's superior quality, but that's no longer the market condition nowadays," a feedstock manager at GS Caltex said.

In 2019, South Korea paid on average USD65.17/b for crude shipments from the US, cheaper than an average of USD66.87/b paid for Saudi crude cargoes received in the year.

Apart from Saudi oil, imports from the UAE in September also jumped 49.6% year on year at 5.562 million barrels, the KNOC data showed. Abu Dhabi crude grades that South Korean refiners typically purchase are light sour Murban crude and medium sour Upper Zakum, the trading managers with direct knowledge of the matter told Platts.

South Korean refiners and condensate splitters processed 76.616 million barrels of crude in September, down 12.3% from 87.329 million barrels a year ago, following a 9% decline in July and August and a 4.7% drop in June, the KNOC data showed.

The drop in crude processed comes as local refiners have lowered run rates to cope with weakening refining margins and tumbling demand of oil products, according to a KNOC official.

The country's top refiner SK Energy has shut its No. 3 crude distillation unit with a capacity of 170,000 b/d since late September, earlier than the original maintenance schedule, a company source told Platts.

The source declined to provide details on when SK Energy will restart the unit, but indicated that maintenance is likely to be longer than usual as the refiners are seeking to keep their crude run rates lower amid the COVID-19 pandemic.

As a result of the drop in crude processing, South Korea's crude stockpiles fell 11.3% year on year at 44.924 million barrels as of end-September.

As MRC reported earlier, SK Global Chemical, a subsidiary of SK Innovation, plans to shut down its production processes for ethylene and ethylene propylene diene monomer (EPDM) within its naphtha cracking center in Ulsan, South Korea. The 200,000-t/y naphtha cracker, which started commercial operation in 1972, and the EPDM unit, which began commercial operation in 1992, will be mothballed from December 2020 to shift the company's focus to high-value added chemicals.

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.

Crude falls on bearish API data, concerns over coronavirus restrictions

MOSCOW (MRC) -- Crude oil futures took a dive during the mid-morning trade in Asia on Oct. 28, erasing most of their overnight gains, as the market grew anxious over a large build in the US crude inventories and over prospects of nationwide lockdowns in Europe, where countries are struggling to contain the second wave of the coronavirus pandemic, reported S&P Global.

At 9:53 am Singapore time (0153 GMT), ICE Brent December crude futures were down 67 cents/b (1.63 %) from the Oct. 27 settle to USD40.53/b, while the NYMEX December light sweet crude contract was down 75 cents/b (1.90%) at USD38.82/b. Both markers had jumped 1.83% and 2.62% to settle at USD41.20/b and USD39.57/b, respectively, on Oct. 27, after Hurricane Zeta shuttered 55.35% of US Gulf crude output.

The fall in oil prices in the morning comes after the American Petroleum Institute reported on Oct. 27 that US crude inventories had risen by 4.577 million barrels in the week ended Oct. 23, indicating that fundamentals in the market remained weak.

The API fueled further bearish sentiment through its reports of a 2.252 million-barrel build in US gasoline inventories. Consequently, a 5.333 million-barrel draw in distillate inventories did nothing to pacify the market.

At 9:53 am Singapore time, the NYMEX November RBOB contract was trading 2.22 cents/gal (1.94%) lower than the Oct. 27 settle at USD1.1212/gal and NYMEX November ULSD contract was down by 1.73 cents/gal (1.49%) at USD1.1404/gal.

Meanwhile, concerns over the surge in coronavirus cases Europe persisted, as the possibility of tighter restrictions, including nationwide lockdowns, threatened to derail demand recovery.

Stephen Innes, chief market strategist at AXI, said in an Oct. 28 note: "The doomy mood music's soundboard remains tuned to growing concerns about rising Covid-19 case counts, and reflationary hopes are fading fast with the French lawmakers taking a frightful economic step back into the Covid full stop abyss and likely to impose a nationwide lockdown, with the Eurozone's Economic juggernaut Germany likely to follow suit."

The onslaught of bearish factors has negated any boost the market may have received from curtailed production in the US Gulf, where producers are bracing for the arrival of Hurricane Zeta.

According to data from the US Bureau of Safety and Environmental Enforcement, as of Oct. 27, 914,811 b/d of crude output, or 55.35% of the US Gulf's crude capacity, had been taken offline and 25% of the region's platforms and rigs, or 157 facilities, had been evacuated.

As MRC wrote before, Chevron, Shell, BP, BHP, Murphy Oil and Equinor confirmed that they had shut down platforms and production ahead of the storm, with BP and Chevron among producers shutting-in all of their operated platforms, S&P Global Platts reported earlier.

We remind that Royal Dutch Shell plc. said earlier this month that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. The plant’s costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.

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.

Formosa Plastics USA to start up new LDPE unit

MOSCOW (MRC) -- Petrochemicals producer Formosa Plastics USA, part of Formosa Petrochemical, may delay the start up of its low density polyethylene (LDPE) line in Point Comfort, Texas, until Oct. 30, several sources told S&P Global Oct. 28.

The company was not available for immediate comment on the delay. Spokesperson Fred Neske last said the project was "still ongoing," in an email on Aug. 14 to Platts.

The startup of the unit was previously delayed to late-July or early-August from April, a spokesman said on May 8. Formosa had originally planned to bring the unit online by late-2019.

As MRC reported earlier, Formosa Plastics broke ground on its USD9.4 billion petrochemical complex in St. James Parish, Louisiana in late March, 2020, after receiving final permits but has now agreed to limit its construction activities until February 2021. The company plans to build the complex in two phases over 10 years. The first phase would include a 1.2-million metric tons/year ethylene plant using ethane as feedstock, with downstream facilities that will produce high-density polyethylene (HDPE), linear low-density polyethylene (LLDPE), and ethylene glycol (EG). A propane dehydrogenation plant and a polypropylene (PP) facility are also planned.

According to MRC's ScanPlast report, September estimated LDPE consumption in Russia fell to 23,930 tonnes from 47,610 tonnes a month earlier. Russian producers reduced their domestic LDPE shipments due to shutdowns for maintenance at production capacities in Ufa, Tomsk and Kazan. Russia's estimated LDPE consumption totalled about 406,500 tonnes in January-September 2020, which virtually corresponded to the last year's figure.

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).

HIMA delivers safety technology solution to BASF new world-scale acetylene facility

MOSCOW (MRC) -- HIMA, a leading independent provider of industrial smart safety solutions, has delivered a comprehensive safety solution consisting of hardware, software and engineering for BASF's new world-scale acetylene facility, said Hydrocarbonprocessing.

BASF has now commissioned this ultramodern facility at its Ludwigshafen site, which features a capacity to produce 90,000 metric tons of acetylene per year. HIMA state-of-the-art safety technology safeguards the safety-critical production processes in this complex project.

In the acetylene facility, HIMA's safety controllers not only perform the classic emergency shutdown function, but they also handle the functions involved in starting up the system and controlling the pre-heater and the coke discharge. After a planning phase that covered around one year, in 2018 HIMA delivered 61 BASF control room racks based on a total of six HIMax systems. The safety specialist wired and tested the HIMax controllers in-house (factory acceptance testing) and delivered the pre-assembled complete modules, including separation layer in accordance with the "just-in-time" requirements of the construction site. Since October 2018, two HIMA engineers have also been permanently based in Ludwigshafen to make sure that the safety solution is seamlessly integrated into the existing automation architecture.

"We have been working successfully with HIMA at the Ludwigshafen site for many years and have found the experience with our partner's safety solutions to be excellent. It seemed logical to also rely on HIMA's technology and expertise for the new acetylene plant. The HIMA experts' service and engineering played a significant role in ensuring that the safety systems were delivered and commissioned smoothly, and that the construction progress schedule was met", noted Meinrad Ramisch, Senior E&I Engineering Manager at BASF.

Despite the complexity of the system, HIMA was able to design a lean and highly reliable hardware solution. The SafeEthernet protocol ensures safe cross communication between controllers in SIL 3 quality. The controller's fast response times in the event of an emergency shutdown and high operational safety (SIL 3) within critical production processes ensure the acetylene facility's high availability and productivity. HIMA contributed its safety expertise and solution competence beginning with the planning phase: Safety experts from Bruhl proactively assisted in designing the hardware and programming the application-specific software, in particular for implementation of the complex burner control circuits.

“We have been working in partnership with BASF at the Ludwigshafen site for many years. We are glad to be on board for this important project and are proud that our safety solution ensures the availability and productivity of the process critical acetylene facility. By providing "just-in-time" delivery of the pre-assembled control room racks and a non-stop on-site service, we were able to ensure compliance with the tight schedule at the construction site and to minimize the workload for BASF", explains Andreas Jau?, the responsible Project Manager at HIMA.

The new BASF world-scale production plant for acetylene at the Ludwigshafen site replaces the existing obsolete facility and has a capacity to produce 90,000 metric tons of acetylene per year. The integration of the plant into the Ludwigshafen site provides BASF with the advantages of efficient resource utilization, excellent production synergies and short supply routes.

HIMA delivered 61 BASF control room racks based on a total of six HIMax systems. To enable read out of the field devices, 103 X-HART modules were also integrated into the controllers.

As MRC informed earlier, ASF is planning to restart its 300,000-metric ton/year toluene diisocyanate (TDI) plant in Ludwigshafen, Germany, by the end of October. The company declared force majeure on 31 August after experiencing technical problems.

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.

BASF-YPC Company Limited (BASF-YPC) is a 50-50 joint venture between BASF and Sinopec, founded in 2000, with a total investment of approximately USD5.5 billion. The integrated petrochemical site produces about three million tons of high-quality chemicals and polymers for the Chinese market annually. The products serve the rapid-growing demand in multiple industries, including agriculture, construction, electronics, pharmaceutical, hygiene, automotive and chemical manufacturing. All BASF-YPC plants are interconnected in order to use products, by-products and energy in the most efficient way, to save cost and to minimize the environmental impact. BASF-YPC posted sales of approximately CNY 19.6 billion in 2019 and employed 1,942 people as of the end of the year.

Univar, PVS Chloralkali announce new hydrochloric acid agreement

Univar, PVS Chloralkali announce new hydrochloric acid agreement

MOSCOW (MRC) -- Univar Solutions Inc. and PVS Chloralkali Inc., a wholly owned subsidiary of PVS Chemicals Inc. (PVS), have announced a new agreement where PVS will transfer railcars located in Ohio, Illinois and Virginia and sourcing agreements for Hydrochloric Acid (HCL) to Univar Solutions, according to Kemicalinfo.

“This agreement further expands Univar Solutions’ large and robust network for its HCL business in North America,” said Joe Serna, vice president, bulk chemical distribution for Univar Solutions.

“We’re very pleased to increase our sourcing capabilities and logistics infrastructure to enhance our presence as a top HCL provider benefitting customers throughout North America.”

As part of the agreement Univar Solutions becomes a strategic provider of HCL for PVS, which is one of the largest managers of chlorides used in the production of finished steel throughout North America.

Univar Solutions’ network, supplier relationships, digital technology, technical expertise, and market knowledge help customers navigate dynamic market conditions and is expected to support this strategic alliance.

“PVS remains active and growing throughout all of its products and markets. This agreement strengthens PVS’s hydrochloric acid business by allowing the company to focus on where we maximize value for our customers,” said David Nicholson, president and CEO of PVS Chemicals, Inc.

As MRC reported earlier, in March 2019, Nexeo Univar Inc., has announced that it has completed the acquisition of Nexeo Solutions, creating a leading global chemical and ingredients solutions provider. The combined company will conduct business as Univar Solutions, reflecting a commitment to combining the 'best of the best' from each legacy organization.

According to MRC's ScanPlast report, Russia's overall PVC production totalled 718,500 tonnes in January-September 2020, down by 0.3% year on year. At the same time, only two producers managed to increase their PVC output.

Univar Solutions is a leading global chemical and ingredient distributor and provider of value added services to customers across a wide range of industries. With the industry's largest private transportation fleet and North American sales force, a vast supplier network, deep market and regulatory knowledge, world-class formulation and recipe development, unparalleled logistics know-how, and industry-leading digital tools, Univar Solutions is a committed ally to customers and suppliers, helping them anticipate, navigate, and leverage meaningful growth opportunities.