Saudi Aramco raises USD8 billion bond

MOSCOW (MRC) -- Saudi Aramco, the world's largest oil firm, returned to the debt markets for the first time since April of last year, selling USD8 billion of bonds to help fund the world’s biggest dividend, reported Bloomberg.

The state oil and gas firm issued the debt on Tuesday after slumping crude prices caused profit to fall by 45% in the third quarter. That’s left it unable to generate enough cash to fund shareholder payouts it’s promised will reach USD75 billion this year. Almost all of those will go to the Saudi Arabian government, which needs the money to plug a widening budget deficit and prop up a slumping economy.

Aramco’s deal was the largest from a company in emerging markets this year, according to data compiled by Bloomberg. The firm sold tranches maturing in three, five, 10, 30 and 50 years. Investors placed more than $50 billion of orders, according to people with knowledge of the matter. Pricing ranged from 1.32% for the shortest notes to 3.65% for the 50-year portion. The spreads over US Treasures were between 110 basis points and roughly 200.

Benchmark Brent oil has dropped almost 35% this year to around USD44 a barrel, with the coronavirus pandemic and lockdowns sapping demand for energy. Still, yields in the developed world are so low that investors have rushed to buy highly-rated emerging-market assets, including those of Aramco, the world’s biggest oil company. The yield on the firm’s USD3 billion of bonds due in 2029 has dropped to 2.11% from 3.04% at the start of 2020. That’s only slightly higher than the rates on the Saudi government’s equivalent bonds.

Tuesday’s deal was also helped by the more bullish sentiment among investors following this month’s progress on coronavirus vaccines. And while some bond traders are wary that U.S. President-elect Joe Biden might regulate oil and gas companies more, Aramco benefits from having such low production costs, according to Todd Schubert, head of fixed-income research at Bank of Singapore.

The Dhahran-based company, rated A1 by Moody’s Investors Service, has slashed spending, cut jobs, and is considering selling some assets as it looks to save money for its shareholder payouts. Despite these efforts, its gearing -- a measure of debt as a percentage of equity - has increased to 21.8%, above its target range of 5% to 15%. Debt also rose because the company took on loans to pay for a USD69 billion acquisition of Saudi Basic Industries Corp., a chemical maker, earlier this year.

Aramco listed shares on the Saudi stock exchange last December. It said it would pay an annual dividend of USD75 billion for at least five years after the initial public offering. It may need to tap the bond market again, given the size of those commitments, according to Bloomberg Intelligence.

The dividend pledge has helped prop up Aramco’s shares. They’ve risen 0.7% this year, while those of rivals such as BP Plc and Royal Dutch Shell Plc have fallen more than 40%.

Still, Saudi Arabia’s reliance on Aramco to support its fiscal needs will weigh on the company’s balance sheet and “risks placing increasing stress on its credit profile,” said Jaimin Patel, a BI analyst.

The lead banks on Tuesday’s bond sale were Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Morgan Stanley and NCB Capital.

Aramco raised USD12 billion in its debut Eurobond sale last year and attracted around USD100 billion of orders.

As MRC wrote before, 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.

We remind that in June, Aramco said it had completed the share acquisition of a 70% stake in SABIC from the Public Investment Fund, the sovereign wealth fund of Saudi Arabia, for a total purchase price of Riyals 259.125 billion (USD69.1 billion). Combined, in 2019 Aramco and SABIC recorded petrochemicals production volume of nearly 90 million mt, including agri-nutrient and specialty products.

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

According to MRC"s ScanPlast report, Russia"s estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, 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.

Saudi Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national oil and natural gas company based in Dhahran, Saudi Arabia. Saudi Aramco"s value has been estimated at up to USD10 trillion in the Financial Times, making it the world"s most valuable company. Saudi Aramco has both the largest proven crude oil reserves, at more than 260 billion barrels, and largest daily oil production.

US specialties market volumes gain in October

MOSCOW (MRC) -- Specialty chemical market volumes in the US increased 1.2% on a sequential basis in October, according to Chemweek with reference to the American Chemistry Council (ACC).

This is a higher growth rate than a revised 0.1% gain for September, and 1.1% increase in August. Of the 28 specialties segments tracked by ACC, 25 posted volume increases in October.

The largest sequential volume gain came in rubber processing chemicals, at 5.0%. Plasticizers, printing inks and plastic additives also posted sequential gains of 3.0% or more. Oilfield chemicals saw the largest volume decline, at 0.6%.

On a year-on-year (YOY) basis, US specialties volumes were down 6.5%, with 23 of the 28 segments tracked by ACC posting decreases. Oilfield chemicals posted the biggest YOY volume drop, at 22.5%, while the biggest increase was in electronic chemicals, at 8.0%.

As MRC reported earlier, 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 year on year by 6.1% 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. September production of primary polymers decreased to 852,000 tonnes against 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.

Kumho Petro Chemical Q3 net profit up 207.3 pct. to 146.2 bln won

MOSCOW (MRC) -- Kumho Petro Chemical Co. has reported its third-quarter net income of 146.2 billion won (USD130.5 million), up 207.3 percent from a year earlier, according to YONHAP News Agency.

The company said in a regulatory filing that it posted 213.8 billion won in operating profit for the quarter, compared with 68.4 billion won a year ago. Revenue fell 2.3 percent to 1.18 trillion won.

The operating profit was 12.2 percent higher than the average estimate, according to the survey by Yonhap Infomax, the financial data firm of Yonhap News Agency. The estimate of net profit was not available.

As MRC reported earlier, in H1 2016, Kumho P&B Chemicals (KPB) completed its phenol, acetone and cumene capacity expansion. KPB is one of the largest producers of benzene derivatives such as phenol, bisphenol-A (BPA), acetone and cumene in South Korea.

Before the expansion, the company operated two phenol/acetone units in Yeosu that were able to produce 380,000 mt/year of phenol 450,000 mt/year of BPA, 235,000 mt/year of acetone and 430,000 mt/year of cumene. With the completion of the capacity expansion, the company had added 300,000 mt/year of phenol, 470,000 mt/year of cumene and 185,000 mt/year of acetone by June 2016.

Phenol is the main feedstock component for the production of bisphenol A (BPA), which, in its turn, is used to produce polycarbonate (PC).

According to MRC's ScanPlast report, Russia's estimated consumption of PC granules (excluding imports and exports to/from Belarus) rose in the first three quarters of 2020 by 32% year on year to 75,600 tonnes (57,200 tonnes a year earlier).

KPB is an offshore joint venture created by the joint investment of South Korea’s Kumho Petrochemical and Japan’s Nippon Steel Chemical Company in 1976.

Merck KGaA, Siemens partner to advance digitalization of modular production

MOSCOW (MRC) -- Merck KGaA says it has entered a collaborative partnership with Siemens for the joint development of an overall process-control system for the automation of modular production of materials and products for the electronics, pharmaceutical, and life science industries, said Chemweek.

Merck will build a first modular plant based on this production system at its Darmstadt, Germany, site by 2022, investing EUR10.0 million (USD11.9 million) for the first phase, it says. Merck has experience with modular production systems, and the aim of the collaboration is to advance the concept of flexible and simple interlinking of individual modules worldwide in the process development and production network of all its business sectors, the company says.

"The time needed from the product idea to market readiness is a critical success factor. The resulting technology platform for standardized, modular production will also be usable in product development in the future. This allows data-based decisions to be made as early as the product development phase and applied seamlessly to the production process. Therefore, in the future, we will be able to respond quicker and even more flexibly to high customer requirements," says Kai Beckmann, CEO/performance materials and board member at Merck responsible for the Darmstadt site.

Merck is taking on the establishment of the production infrastructure and Siemens is responsible for the development of process orchestration layer (POL) technology, the company says. POL is a supervisory control system that interlinks various production modules to an overall process, which is expected to operate without the need for additional programming, Merck says.

"This will create new opportunities for us to drive forward modular production and to meet growing requirements for chemical and pharmaceutical processes in our joint development work,” says Eckard Eberle, CEO/process automation at Siemens.

The project forms part of a EUR1-billion investment program announced last year for Merck's headquarters at Darmstadt until 2025, which will also be funded by the German federal ministry of economic affairs and energy on the basis that the plan's investments in modular, flexible, and efficient technology can reduce the carbon footprint of production, Merck says.

As MRC informed earlier, Merck KGaA has presented its new sustainability strategy, with which it aims to integrate sustainability more deeply as an essential component of its corporate strategy. The main aims of the strategy are to develop sustainable science and technology, integrate sustainability into all the company's value chains by 2030, and achieve climate neutrality and reduce its resource consumption by 2040, Merck says. The company will report annually on the current implementation status of the strategy.

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 pharmaceutical 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.

WeylChem to build aromatic-ring chlorination plant at Frankfurt

MOSCOW (MRC) -- WeylChem (Frankfurt, Germany), the fine chemicals platform of International Chemical Investors Group (ICIG; Luxembourg), says it is investing to build a production facility for aromatic-ring chlorination at the group's Frankfurt-Hochst site, said Chemweek.

The start of production at the new facility is planned for the first quarter of 2022, the company says. Further details have not been disclosed. The facility will strengthen the company’s capabilities in side-chain chlorination and expand them to aromatic-ring chlorination for the specialty chemicals market, meeting the growing demand in Europe for local and resilient supply chains, the company says.

WeylChem will also establish a sustainable production cycle with the new plant, in which 4-chlorobenzotrichloride, a by-product of side-chain chlorination, will be refined to 2, 3, 4, 5-tetrachlorobenzoyl chloride and no longer need to be disposed of, the company says. With all the other by-products being refined or sold, the side-chain chlorination will reduce the company's waste footprint significantly, it says.

It will also enable Weylchem to backward integrate and install its own proprietary supply chain to use these products in its halogen exchange multipurpose plant at Allessa in Frankfurt-Fechenheim, the company says.

As per MRC, Clariant, a world leader in specialty chemicals, announced the closing of the sale of its Detergents and Intermediates business to International Chemical Investors Group (ICIG). The total consideration of the sale amounts to CHF 58 million, out of which CHF 20 million in cash became due at closing. Worldwide, 660 employees were transferred from Clariant to the new ICIG business, which from now on will operate under the WeylChem brand umbrella.

As MRC informed earlier, October production of sodium hydroxide (caustic soda) were 109,000 tonnes (100% of the basic substance) versus 108,000 tonnes a month earlier. Overall output of caustic soda totalled 1,054,600 tonnes in the first ten months of 2020, down by 1.6% year on year.