Brenntag posts lower third-quarter net profit, achieves YOY EBITDA growth

MOSCOW (MRC) -- Brenntag, the market leader in chemical and ingredients distribution, has reported a resilient third-quarter performance and says the impact from the COVID-19 pandemic on its business is “still limited", said Chemweek.

Net profit was down in the third quarter to EUR120.6 million (USD141.1 million) from a prior-year figure of EUR128.4 million on sales of EUR2.88 billion, down 7.7% year on year (YOY) on a constant currency basis. The company achieved YOY growth in operating EBITDA, up 4.9% to EUR264.4 million. The EMEA, APAC, and Latin America regions “showed a particularly good development,” but conditions in North America were tougher, Brenntag says. Group operating gross profit slipped 0.2% YOY to EUR690.6 million.

“Brenntag achieved strong results in the third quarter of 2020,” says CEO Christian Kohlpaintner. “The COVID-19 pandemic has been with us—as with many other companies—throughout the year and has significantly impacted the overall economic environment. Nevertheless, we once again show a positive business development and our operations remained with limited effect by the COVID-19 crisis in the reporting period."

Third-quarter operating gross profit in EMEA was EUR294.8 million, up 4.8% YOY. The company says that despite restrictions due to COVID-19, its business in the region achieved operating EBITDA growth of 11.3% YOY, to EUR112.9 million.

The business environment in North America remained “challenging with the oil and gas industry particularly weak,” Brenntag says. Operating gross profit generated by Brenntag in North America was down 9.3% YOY to EUR273.9 million and operating EBITDA was EUR110.0 million, down 11.7%.

Brenntag reports robust third-quarter results for its business in Latin America on slowly recovering volumes, good margin management, and cost control. Regional operating gross profit of EUR44.5 million was up 15.7% YOY and operating EBITDA jumped 39.8% YOY to EUR15.1 million.

The company says its results in APAC reflect the recovery in the regional economy in the third quarter after strict lockdown for several months due to the pandemic. At EUR72.5 million, operating gross profit in the region was 12.0% above the prior-year level of EUR68.1 million. Third-quarter operating EBITDA leapt 35.9% YOY to EUR33.0 million.

Brenntag has confirmed its full-year outlook, which it reinstated in September after suspending guidance in April. The company expects 2020 operating EBITDA of EUR1.000–1.040 billion, compared with EUR1.001 billion in 2019. The forecast assumes “no further significant government measures to contain the pandemic and related negative effects on the economy,” the company says. It also does not envisage any special items or significant changes in current exchange rates by the end of the year. The forecast includes contributions to earnings from acquisitions. “As the COVID-19 pandemic will most likely impact the economy for the rest of this year and also in 2021, the presumed business environment continues to be volatile,” Brenntag says. The company announced details recently of its transformation program, which includes job cuts and site closures.

As MRC informed earlier, Brenntag Essentials and Brenntag Specialties. Each division will have a focus on customer- and supplier needs. The new operating model forms part of the company’s previously announced transformation program, Project Brenntag. Brenntag says that with the two new divisions it will better leverage on its strengths and sharpen its profile toward relevant industry segments.

In August 2020, Brenntag acquired the operating assets of Suffolk Solutions’ (Suffolk, Virginia) caustic soda distribution business. Financial terms of the deal have not been disclose.

We remind, Russia's September production of sodium hydroxide (caustic soda) were 108,000 tonnes (100% of the basic substance) versus 99,200 tonnes a month earlier. Overall output of caustic soda totalled 945,600 tonnes in the first nine months of 2020, down by 1.6% year on year.

Reducing human error in gas pipeline operations

MOSCOW (MRC) -- At the virtual 2020 GPA Midstream Fall Technical Conference, Jill Watson, Senior Probabilistic Risk Engineer at Enercon in Texas, provided a working-level understanding of human reliability analysis for gas pipeline operations, said Hydrocarbonprocessing.

One of nine PHMSA pipeline threat categories that are required to be addressed under an integrity management plan is incorrect operations (IOs). This threat occurs as a result of an operator action that results in an unintended consequence due to human error.

IOs resulted in approximately 6% of significant events and around 8% of non-significant events that occurred during pipeline incidents from 2010 to 2013, Watson noted. Both significant and non-significant IOs can be addressed through a comprehensive human reliability analysis (HRA). HRA is the incorporation of human "contributions" into the analysis of safety and risk. The results derived from performing an HRA can be used to improve operator responses and reduce human errors.

Mitigating human error. PHMSA risk guidance published in February 2020 states that operator actions and IOs are a leading contributing cause of pipeline incidents. "Audits show that humans don't always diagnose or execute actions correctly, even if they have perfectly written procedures," Watson explained. "We need to find a better way to advance human performance in completing critical tasks and providing additional administrative controls in order to provide safety and quicker responses in the gas industry."

Error-reduction tools and well-written documentation and procedures are essential. Such tools and procedures include awareness training, self-checking and peer-checking, procedure steps defined with action verbs (e.g., "close," "verify," "check"), short series of listed steps in dual-column or checklist format, and place-keeping or sign-off for tracking steps.

Examining human reliability. Industries that already use HRA include nuclear, offshore oil and gas, aerospace, pipeline, aviation and chemical production. A number of factors can cause human errors, including adverse environmental conditions, unclear roles or responsibilities, fatigue, time pressures (especially in facility control rooms), high workloads, confusing displays or controls, and lack of clear directives. Human errors can result in a reduction of system reliability and/or safety margins, increased risk, or degraded conditions. The HRA method is a structured approach used to identify potential human failure events (HFEs) so that they can be prevented.

Watson shared an example HRA, wherein a study of operator actions was completed using pipeline procedures to identify critical human interactions; potential errors of commission, omission and cognition; and performance-shaping factors.

In performing an HRA, safety-related actions or critical tasks performed by operators and plant personnel must first be identified, Watson explained. The procedures required to execute these actions and critical tasks are then outlined and analyzed. Finally, these procedures are revised for clarity and simplicity in light of the risk of associated human errors. The HRA method can help improve facility operations and personnel safety.

As per MRC, Abu Dhabi National Oil Co., the UAE's biggest energy producer, has recently inked a USD20.7 billion deal with a group of investors to acquire a 49% stake in its gas pipelines a year after striking a similar transaction for its oil pipelines.

We remind, Russia and the US continue to clash over the future of the Nord Stream 2 gas pipeline, with Moscow hitting out at calls from Washington for the creation of a "coalition" of nations aimed at blocking completion of the project. A little over 150 km of Nord Stream 2 remains to be laid in Danish and German waters, but with the political debate becoming ever more frenzied, it remains unclear how and when the pipeline will be completed.

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.

Mainland China to continue lead role in global styrene demand, prices

MOSCOW (MRC) -- Asia, especially mainland China, will continue to lead global styrene demand and price directions amid massive capacity additions and anti-dumping duties that will result in industry-wide restructuring, according to Brian Lee, executive director at IHS Markit, said Chemweek.

Impacted by COVID-19, the global styrene market this year will be slightly under 29 million metric tons, compared to more than 30 million metric tons previously, says Lee, speaking at IHS Markit’s Asia Chemical Conference 2020, being held in a virtual format. In terms of end use demand, the largest styrene application is for electronics and appliances at 32%, followed by packaging at around 32%, and building and construction at about 21%.

Northeast Asia capacity at 14 million metric tons/year (MMt/y) accounts for 49% of worldwide styrene production in 2020, while forecast demand in the region totals 16.1 million metric tons, with mainland China accounting for 63%, South Korea at 15%, and Taiwan at 12%. Hence, demand or supply shifts in mainland China will impact the overall industry.

The styrene market has rebalanced following limited capacity additions over the last 7-8 years, with producers enjoying healthy margins in the last five years. However, heavy capacity additions came onstream this year while demand was much lower than expected, leading to a longer market and poorer styrene margins than the previous few years, Lee says.

This situation will continue for the next couple of years as capacity additions outweigh demand growth, he says. Most of the new additions are integrated facilities in China, with Hengli Petrochemical (720,000 metric tons/year), Liaoning Bora (360,000 metric tons/year), and Zhejiang Petrochemical (1.2 million metric tons/year) starting up this year. In 2021 at least another 2.6 MMt/y of new capacity is expected, according to IHS Markit data.

Separately, the propylene oxide–styrene monomer (POSM) process of styrene production, despite its smaller capacities, is also making a comeback due to improved styrene margins over the last five years. The POSM portion of styrene production is forecast to increase to around 22% of total capacity within a couple of years, compared to around 18% in 2020. This means that propylene oxide (PO) balances and margin will also impact styrene.

The elasticity of styrene demand growth is around 0.7% of GDP growth. Prior to COVID-19, IHS Markit forecasted global GDP growth for 2020 of around 2.4%, with styrene demand growth at slightly less than 2% with a similar trend in 2021. However, as the pandemic spread, IHS Markit revised the long-term balance based on global GDP growth for 2020 at around negative 5.5%, with styrene demand growth at around minus 5%.

Demand growth in Northeast Asia during the first quarter of 2020 fell 15% year-on-year but the COVID-19 situation stabilized faster than expected, with monthly styrene demand growth turning positive from June onwards. The demand recovery increased further during the third quarter, supported by pent-up demand from China. If this trend continues in the fourth quarter, actual demand growth in 2020 would to be much better than previous IHS Markit forecasts.

As MRC informed earlier, AmSty is announcing its commitment that all products designed for foodservice and food packaging applications will contain 25 percent recycled content by 2030. The leading integrated producer of polystyrene and styrene monomer continues to reach milestones toward this goal with its circular recycling process operating commercially at Regenyx LLC, its joint venture with Agilyx Corporation.

According to ICIS-MRC Price report, October prices of Russian PS continued their upward trend. A shortage of material remained in the domestic market. Traders said Nizhnekamskneftekhim reduced its offer prices for this month's PS purchases to 40%. October prices of Nizhnekamskneftekhim's GPPS grew for the agreed with buyers quantities to Rb89,000-95,000/tonne CPT Moscow, including VAT, whereas HIPS - to Rb93,000-99,000/tonne CPT Moscow, including VAT.

COVID-19 - News digest as of 11.11.2020

1. Shell to cut jobs and capacity at major Singapore refinery

MOSCOW (MRC) -- Royal Dutch Shell will halve crude processing capacity and cut jobs at its Pulau Bukom oil refinery in Singapore as part of an overhaul to reduce its carbon emissions, reported Reuters. The refinery on Pulau Bukom, a small island in the Southeast Asian city-state, can process 500,000 bpd of oil and is Shell’s largest wholly-owned refinery worldwide. The move brings the total refining capacity cuts by Shell in recent months to 571,000 bpd, or just over a fifth of its capacity globally. Shell aims to reduce the number of its refineries as part of a drive to slash carbon dioxide (CO2) emissions to net zero by 2050 and restructure its operations by reducing its oil and gas business and expanding its renewable energy and power division. The coronavirus pandemic has destroyed fuel demand, estimated at 4.7 million bpd less during the next five years, and accelerated a rationalization of global refining capacity, Rob Smith, director at consultancy IHS Markit, said.


Honeywell UOP Oleflex technology continues growth in China

MOSCOW (MRC) -- Honeywell announced Zhenhua Petrochemical Co. Ltd will use Honeywell UOP’s C3 Oleflex technology for propane dehydrogenation to process 1 million metric tons per year of polymer-grade propylene for a proposed plant in Dongying City, Shandong Province, China, according to Hydrocarbonprocessing.

Honeywell UOP, a leading technology provider for the oil and gas industry, will provide services, equipment, catalysts and adsorbents for the Zhenhua plant. The project, which will be conducted in two phases, marks the 42nd and 43rd awards for C3 Oleflex technology in China, which has seen strong growth as demand continues to rise for propylene, the primary component in many plastic resins, films and fibers.

Since 2011, 68 of the last 91 dehydrogenation projects globally have been based on UOP technology, including many in China. Global production capacity of propylene from Oleflex technology currently stands at approximately 7.9 million metric tons per year.

“Customers such as Zhenhua Petrochemical trust us to deliver catalytic dehydrogenation technology to feed downstream polymer-grade propylene production and meet the ongoing demand for propane derivatives in China,” said Bryan Glover, vice president and general manager, UOP Process Technologies. “With this project, we will have licensed capacity to generate more than 15 million metric tons per year of polymer-grade propylene in China.”

UOP’s C3 Oleflex technology uses catalytic dehydrogenation to convert propane to propylene and is designed to have a lower cash cost of production and higher return on investment compared to competing dehydrogenation technologies. The Oleflex technology’s low-energy consumption, low-emissions and fully recyclable, platinum-alumina-based catalyst system also helps minimize impact on the environment. The independent reactor and regeneration design helps maximize operating flexibility and onstream reliability.

As MRC reported earlier, in May, 2020, Honeywell announced that Enterprise Products Partners L.P. will use Honeywell UOP’s C3 Oleflex technology in its second propane dehydrogenation plant, called "PDH 2". Located near Mont Belvieu, Texas, PDH 2 will produce 750,000 metric tons per year of polymer-grade propylene as part of Enterprise’s expansion of propylene manufacturing capacity.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers" inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Zhenhua Petrochemical is a joint venture between Zhenhua Import and Export Corporation and Dongying Yatong Petrochemical company in Dongying Port. Dongying Yatong Petrochemical Co. Ltd., one of the leading petrochemical companies in Shandong, produces and operates gasoline, diesel, liquefied petroleum gas, MTBE, propylene, sulfur, petroleum coke, fuel oil and other petrochemical products. In recent years, it has been committed to upgrading the oil-to-chemicals industry chain and increasing investment in chemical projects.