PKN Orlen plans major expansion of petchems, renewables

MOSCOW (MRC) -- PKN Orlen (Plock, Poland) will invest an average of 4.4 billion zloty (USD1.2 billion) per year between 2021 and 2030 on a major expansion of its integrated petrochemicals business and the creation of a plastics recycling division as part of an enhanced strategic focus on petchems and renewables over the next 10 years, according to Chemweek.

By 2030 it will have an annual petchems output of approximately 15 million metric tons, and be “an active player” in plastics recycling with 300,000-400,000 metric tons/year of installed capacity, PKN Orlen says. The strategic expansion is forecast to increase its petchems EBITDA from Zl 2.3 billion in 2019 to approximately Zl 7.0 billion by 2030, according to the company. “We are set to become one of Europe’s largest integrated petrochemical producers and expand our recycling business,” it says.

The capital expenditure (capex) plans, outlined in its latest strategy update, are being implemented to achieve targets including expanding the share of specialty products in its petchems portfolio from 16% in 2019 to 25% by 2030, and ramping up its production capacities for olefins and other base chemicals in order to supply feedstock for the development of the specialty and other advanced petchems products. The increased focus on petchems will specifically include expanding its position in products such as phenol and other aromatic derivatives, it says.

A chart in an accompanying strategy presentation shows planned petchems investment focused initially on base chemicals between 2021 and 2023, with a growing focus on advanced petchems products from 2022 to 2028.

By 2030, around half of the company’s profits from crude oil processing will be derived from its petchems business, according to PKN Orlen.

In polymers the company is aiming to strengthen its position and extend its value chain to include compounding and concentrates, as well as “building [a] foothold in sustainable development” through mechanical and chemical recycling of plastics and the development of waste-to-energy solutions, while also implementing advanced closed-loop technologies, it says. PKN Orlen had no plastics recycling capacity in 2019. It also plans to build a lactic acid unit. Recycling and biomaterials will be new branches of its petchems segment, it says.

PKN Orlen has set an overall capex program of Zl 140.0 billion for the period to 2030, with Zl 85 billion to be spent in new areas, such as petchems and renewables, including hydrogen and biofuels. A total of Zl 55.0 billion will be spent on key existing assets, mostly in refining, to increase their efficiency and extend their life cycle in order to maximize performance.

Approximately Zl 3.0 billion will be spent over the period on innovation and R&D, with a focus on green technologies, it says.

The strategy update highlights the company’s focus on implementing an energy transition path by 2030, “charted around renewable energy and advanced petrochemicals,” it says. “Business diversification efforts will be driven by maximized profits from the group’s existing core business, to be transformed based on new technologies, in line with the emerging environmental and consumer trends.” PKN Orlen’s long-term objective is for net zero carbon emissions by 2050. It has previously announced a target of reducing emissions by 20% from its existing refining and petchem assets by 2030, and by 33% from its power generation business.

“We are building a new multi-utility group capable of successfully competing at a time of major transformational change. We are fully aware that the business segments being our strongest suit today will require a profound change, for which we are well prepared. Over the recent years, we have taken consistent steps to effectively strengthen the Group, preparing it for the imminent transformation,” says Daniel Obajtek, PKN Orlen’s president.

Refining will remain an "important segment" of the company’s business until 2030, driven by energy efficiency improvements, increased crude conversion rates, and integration with Grupa Lotos. Expansion of biofuel and hydrogen fuel output will be another vital driver, it says.

As MRC reported earlier, earlier this year, Honeywell announced that PKN Orlen plans to use the UOP Q-Max and Phenol 3G technologies to produce 200,000 metric tons per year of phenol at its facility in Plock, Poland.

Phenol is one of the main feedstocks for the production of bisphenol A (BPA), which, in its turn, is used for the production of 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). And although in the injection moulding sector, the market dropped by 5% with consumption of 7,300 tonnes year on year (7,700 tonnes), it increased by 39% in the extrusion sector to 67,400 tonnes (48,600 tonnes a year earlier). The blow moulding sector grew in January-September 2020 by 1% year on year to 880 tonnes (870 tonnes a year earlier).

COVID-19 - News digest as of 01.12.2020

1.Honeywell reinstates guidance, expects 14% profit decline in 2020

MOSCOW (MRC) -- Honeywell's performance materials and technologies unit reports third-quarter net profit of USD442 million, down 24.0% year on year (YOY), on sales down 15.6% YOY, to USD2.2 billion, said the company. Honeywell (HON) - Get Report on Friday posted third-quarter adjusted earnings that beat analysts’ forecasts and sales ahead of predictions as double-digit growth in its defense and space, warehouse automation and PPE products and services offset a drop in aerospace revenue. The company also reinstated guidance for its fourth quarter and full year amid expectations that the worst effects of the pandemic are past. Honeywell posted net income of USD781 million, or USD1.07 a share, vs. USD1.65 billion, or USD2.23 a share, in the comparable year-ago period. On an adjusted basis, the company earned USD1.56 a share, above the USD1.49 a share expected by analysts polled by FactSet. Sales came in at USD7.8 billion, down 14% from USD9.1 billion a year ago though above analysts’ forecasts of USD7.7 billion. Aerospace sales, which includes parts for commercial airplanes, fell 25% on a year-over-year basis, driven by reduced flight hours and lower volumes among carriers due to the pandemic and drop-off in travel.


Sudharshan Chemical Targets No.3 Spot in Global Pigment Manufacturing

MOSCOW (MRC) -- Sudarshan Chemical Industries Ltd (SCIL), the largest pigment manufacturer in India (with >35% market share) is aiming to achieve the top 3rd position globally by market share by focusing on its core business, developing R&D, expanding to new markets, and improving manufacturing and operations, according to Kemicalinfo.

Currently, SCIL is the fourth-largest pigment manufacturer by market share, globally.

Having this global scale is essential to success in pigments as it leads to sustainable growth, cheaper feedstock, and access to cutting-edge technologies, a report published by HDFC Securities said.

“SCIL’s current Capex cycle was started in FY17. It has incurred INR 5.5 billion over FY17-20 and planned for INR 3.5 billion over FY21-FY22E. While a significant portion of Capex targets growth, some part of it is targeting margin expansion. We expect asset-turnover to be ~2.3-2.5x at peak utilization” the report said.

Further, SCIL is enhancing its product mix towards higher-margin and higher-realisation speciality products such as azo pigments, cosmetics and pigment dispersions vs. non-speciality ones. It plans to launch ~25 products globally.

Two major global players shifting away from the pigment business could act as a tailwind for Indian pigment manufacturers. “We believe SCIL is in a sweet spot to seize this opportunity by offering products similar to those of global players,” the report added.

The report states that SCIL opened a subsidiary, Sudarshan Japan Limited in Japan to serve the Japanese market last year and also has plans to expand in South East Asia and South Korea. “We expect revenue to grow at a 14.8% CAGR over FY21-24E given SCIL’s plans for geographical expansion and new product offerings,” it added.

The company launched high-performance yellow pigment in 2019 which SCIL developed the entire technology in-house and launched it within eighteen months of inception, the report added.

According to the report, SCIL has a global distribution network, with eight sales offices, around 60 channel partners, and sales in over 85 countries. It has also set up marketing subsidiaries in Europe, North America and Mexico to support revenue growth from these markets in coming years.

Its wholly-owned Chinese subsidiary is engaged indistributing pigments in local markets and improving sourcing efficiencies.

SCIL sources ~30% of its raw material from China. Pigment exports of the company constituted 50% of total sales in FY20, up from 32% in FY10.

Export contribution to revenue is expected to go up with rising production of high-performance and effect pigments and global expansion.

As MRC wrote previously, in H2 October, 2020, Clariant has relaunched the sale of its pigments unit, after putting the auction on hold as the coronavirus pandemic engulfed the world and disrupted talks with prospective buyers. The Muttenz-based company sent out information packages to prospective buyers of the unit in October, and people familiar with the preparations added that buyout groups including PAI, Lone Star, Triton and SK Capital are expected to express interest.

We remind that in early September, 2020, the Competition Commission of India (CCI) cleared SABIC BV's incremental acquisition of a 6.51% shareholding in Clariant AG. The transaction, which will raise SABIC's stake in Clariant to 31.5%, is part of SABIC's growth strategy in specialties.

We also 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 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.

Schneider Electric invests USD40 million to strengthen US supply chain

MOSCOW (MRC) -- Schneider Electric, a leader in the digital transformation of energy management and automation, announced an additional USD40 million investment towards modernizing its US manufacturing plants in Iowa, Kentucky, Nebraska, and Texas, according to Hydrocarbonprocessing.

The monies will go towards innovative technologies and new production lines that will help increase Schneider Electric’s capacity of operations in the US for its customers, as well as further develop its local workforce.

COVID-19 placed a spotlight on the critical vulnerabilities global manufacturing and supply chains can face during unprecedented disruption. This additional stake in the US is part of a larger, strategic approach to strengthen resilience, increase flexibility, and safeguard its supply chain. The initiative will provide Schneider Electric with greater control of its production processes that will help them deliver quality products and services to its customers, while introducing new learning opportunities to the workforce.

“This investment demonstrates our continued commitment to both our customers and our employees, while setting the foundation for the future,” said Annette Clayton, CEO and president, Schneider Electric North America. “We now have the technology and resources available to expand and efficiently produce more locally. By modernizing and localizing our operations, we can better serve our customers and minimize the risk of interruption when we face the challenges of global economic changes.”

For example, Schneider Electric’s smart factory in Lexington, KY recently earned the distinction of 4th Industrial Revolution (4IR) Advanced Lighthouse by the World Economic Forum, becoming the third of its factories to receive this honor. The factory was recognized for its success in adopting Industry 4.0 technologies at scale with demonstrated benefits around energy efficiency, sustainability and overall cost savings, while offering increasing agility and resiliency within the operation.

As US-based companies increasingly look to reshore more of their manufacturing operations, the industry is creating more jobs that will require a new wave of a skilled workforce to fill them. In Schneider Electric’s case, the company has hired and pledges to hire 130 new employees through early 2021. This new era of investing in smart manufacturing and automation tools is not only introducing the opportunity to upskill the industrial workforce, but it can help attract new talent and have a positive impact against the skills gap concerns the industry faces. As part of this investment, Schneider Electric employees will receive more digital training opportunities and tools that will enable them to adopt new skill sets and work more efficiently in a modern setting.

As MRC reported earlier, Royal Dutch Shell may begin the permanent shutdown of its 211,146 bpd Convent, Louisiana, refinery early this week. Shell announced on Nov. 5 the refinery, located 57 miles (92 km) west of New Orleans, was to close after the company failed to find a buyer amid the COVID-19 pandemic. The Convent refinery is the first U.S. Gulf Coast refinery to permanently close because of the pandemic-related decline in demand for refined products. Eight other North American plants have been idled or targeted for shutdowns.

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 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high density 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, excluding producers" inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.

Oil pulls back as OPEC punts on production cut extensions

MOSCOW (MRC) -- Oil futures settled lower Nov. 30 as OPEC delegates finished a first day of negotiations without a deal on whether to extend crude production quotas into the new year, reported S&P Global.

NYMEX January WTI settled 19 cents lower at USD45.34/b, and ICE January Brent finished the session down 59 cents at USD47.59/b.

The OPEC+ alliance at one point seemed close to a decision to maintain its collective 7.7 million b/d in output cuts through at least March to buttress oil prices against the impact of rising COVID-19 infections, but fissures have emerged as fatigue among many countries to rein in so much of their crude production has grown, and talks so far have failed to achieve a watertight consensus.

NYMEX December RBOB settled 3.31 cents lower Nov. 30 at USD1.2489/gal, and December ULSD was down 2.46 cents at USD1.3559/gal.

Year-ahead WTI futures settled in a 2 cents/b backwardation compared with the front-month contract, but Brent forward curve fell deeper into contango with the year-ahead contract settling at a 45 cent/b premium to front month.

OPEC held its formal meeting Nov. 30, intending to clinch a deal ministers would then hammer out the following day with its nine non-OPEC partners. Delegates said the framework of a cut extension for three months had been reached, but the UAE, which has been wavering in its commitment to OPEC, has yet to take a position, endangering the negotiations.

"It is becoming apparent that you are not having everyone fall in line here, and rightfully so; the Asian economic recovery is strong," OANDA senior market analyst Edward Moya said. "If the recovery continues like it is, (a quota extension) is basically giving US shale producers the greenlight to win back market share."

Chinese refinery runs hit a fresh all-time high of 14.15 million b/d in October, National Bureau of Statistics data showed Nov. 25.

Even an agreement among OPEC is not certain to be ratified by the non-OPEC members. Russia has expressed a desire to gradually increase quotas, while Kazakhstan wants to see the cuts rolled back as scheduled, sources told S&P Global Platts after preliminary consultations among some members were organized Nov. 29.

Without an extension agreement, the OPEC+ curbs are scheduled to ease to 5.8 million b/d from January, which many analysts have said could overwhelm the market given the recent surge in crude production from quota-exempt Libya.

"We calculate the market surplus could be as high as 1.5 million-3 million b/d in H1 2021 if it doesn't extend cuts," ANZ analysts said in a note Nov. 30.

As MRC reported previously, global oil demand may have already peaked, according to BP's latest long-term energy outlook, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.

Earlier this year, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40% in 2020, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

And in September 2019, six world's major petrochemical companies in Flanders, Belgium, North Rhine-Westphalia, Germany, and the Netherlands (Trilateral Region) announced the creation of a consortium to jointly investigate how naphtha or gas steam crackers could be operated using renewable electricity instead of fossil fuels. The Cracker of the Future consortium, which includes BASF, Borealis, BP, LyondellBasell, SABIC and Total, aims to produce base chemicals while also significantly reducing carbon emissions. The companies agreed to invest in R&D and knowledge sharing as they assess the possibility of transitioning their base chemical production to renewable electricity.

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.