COVID-19 - News digest as of 11.12.2020

1. Australia moves into top three countries for renewable investment

MOSCOW (MRC) -- Australia has moved into the three most attractive countries in the world for renewables investment for the first time due to rapid solar photovoltaic (PV) deployment, research shows, said Hydrocarbonprocessing. In a bi-annual index of the top 40 renewable energy markets worldwide by consultancy EY, the United States held on to top spot, followed by China. Australia rose to third place, from fourth in the last ranking in May, while India climbed to fourth from seventh due to record low solar tariff bids and a new target for renewables generation, EY said. Australia has deployed more than 10 gigawatts of roof-mounted solar PV, by far the largest per capita rooftop-PV deployment in the world. Its plans for renewable energy export links to Asia also helped elevate its position. However, Australia’s renewables investment fell in the second quarter due to the COVID-19 crisis and policy uncertainty and the government continues to subsidize both the natural gas and oil refining industries as part of efforts to revitalize the economy.


Crude oil futures buoyed by vaccine momentum ahead of possible FDA approval

MOSCOW (MRC) -- Crude oil futures continued their upward trajectory during mid-morning Asian trade Dec. 11 as vaccine momentum intensified following an endorsement of the Pfizer-BioNTech vaccine by the US Food and Drug Administration advisory committee, and crude demand from India and China also supporting sentiment, reported S&P Global.

At 10:58 am Singapore time (0258 GMT), the ICE Brent February contract was up 15 cents/b (0.3%) from the Dec. 10 settle to USD50.41/b, while the January NYMEX light sweet crude contract was up 22 cents/b (0.47%) at USD47/b. Both markers had closed at nine-month highs on Dec. 10, with the ICE Brent February contract rising 2.84% to settle at USD50.25/b and the January NYMEX light sweet crude contract rising 2.77% to settle at USD46.78.

The risk-on sentiment in the market intensified after a committee of experts on the Vaccines and Related Biological Products advisory committee voted that the FDA grant the Pfizer-BioNTech Vaccine an Emergency Use Authorization

With the committee's endorsement, the vaccine is one step closer to receiving the EUA. The final decision from the FDA could come in "the next couple" of days, according to Marion Gruber, the director of the FDA's vaccine research office.

The vaccine has already been approved in Canada, Bahrain, Saudi Arabia and the UK, the last of which began distributing the vaccine on Dec. 8.

"Oil prices broke key chart resistance and climbed to a nine-month high despite a large build in US inventories [reported on Dec. 9]. The rally was propelled by FDA's warm gesture towards a wider distribution of Pfizer's COVID-19 vaccine in a meeting on Thursday (Dec. 10), which raised prospects for a faster economic recovery and removal of lockdown measures," Margaret Yang, strategist at DailyFX told S&P Global Platts Dec. 11.

"Besides, continuous strengthening of iron ore and copper prices reflected strong demand from Asia, which also brightened the energy demand outlook," she added.

To this, Stephen Innes, chief global strategist at Axi in a Dec. 11 note said: "Asia continues to provide much of the backstop for physical with unquenchable oil purchases by China teapots and multiple Indian producer tenders in the pipeline and the softer US dollar is helping the overall commodity cause."

Meanwhile, uncertainty over the US stimulus package -- seen by many to be key to boosting US economic recovery and oil demand -- continued to persist in the market, as lawmakers failed to reach an agreement on contentious issues including the Senate Republican's demand of a "liability shield" for businesses and entities such as schools and universities.

As MRC informed 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 PE and PP.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,760,950 tonnes in the first ten months of 2020, up by 3% year on year. Only high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased. At the same time, PP shipments to the Russian market reached 978,870 tonnes in January-October 2020 (calculated using the formula: production minus exports plus imports minus producers' inventories as of 1 January, 2020). Supply of exclusively of PP random copolymer increased.

Butadiene demand recovery to battle fresh online capacity

MOSCOW (MRC) -- Global butadiene demand is expected to continue to recover in the first half of 2021, in line with increasing downstream tire and automobile production. However, Asia's spot demand may slow down in line with rising butadiene capacities, reported S&P Global.

"Petrochemical demand has remained resilient," Enterprise Products Partners' co-CEO Randall Fowler said in its third quarter earnings call. This was seen in butadiene and its derivatives in the latter part of 2020.

In the early part of the year, the COVID-19 pandemic slashed downstream tire and automobile plant operations, impacting the global butadiene market. In order to clear excess supplies, European suppliers actively exported cargoes to Asia, which pushed Asian butadiene prices to an all-time low in May 2020, according to S&P Global Platts data.

However, the butadiene market started to rebound in the fourth quarter of 2020, driven by multiple butadiene plant hiccups in Asia. In Europe, market sources have said that the bull run seen in the fourth quarter will continue into the first quarter of 2021, pulled by strong buying appetite in Asia.

In Malaysia, Pengerang Refining and Petrochemical, or PRefChem, plans to restart its 180,000 mt/year butadiene plant in Johor in Q1 2021 following a fire at its refinery in March 2020.

There are additional capacity increases expected in China, South Korea and Thailand.

Market sources said butadiene exports from China could increase in 2021 in line with rising capacities. In 2020, ex-China exports were heard mainly to South Korea. According to Korean customs, Korea imported around 4,000 mt of butadiene from China between January and October, two times more than a year earlier.

In the US, market participants predict continued strength in pricing in H1 2021 due to the ongoing curtailment of supplies following TPC Group's explosion at its Port Neches butadiene unit during the Thanksgiving holiday in 2019 and increased demand from the automobile industry.

In early 2021, there will be many challenges for butadiene supply and the US will need to compensate through imports as automobile demand spikes, market sources said.

The Association of Natural Rubber Producing Countries (ANRPC) forecast a 4.9% drop in global natural rubber supply in 2020, when compared with 2019.

Goodyear Tire & Rubber Company CFO Darren Wells said higher costs for butadiene and natural rubber were "the kind of snapback in price that we would expect... the industry is ramping up production or getting production back to pre-COVID levels."

Wells noted that, if production holds at current levels, the company could see raw material costs rebounding to 2019 levels.

In Europe, sources expected demand to continue to gradually improve, though remained wary about a widespread recovery in the synthetic rubber sector until the COVID-19 pandemic abated.

European synthetic rubber markets are expected to remain primarily driven by exports to Asia, initially with high run rates seen at the end of 2020 due to an open arbitrage east, amid stagnant domestic demand.

"There is a big question mark for next year. For a (tire market) return to pre-COVID levels, the 2024-2025 scenario is the pessimistic scenario and 2022 is the optimistic," one butadiene consumer said.

Market sources said butadiene demand should also come from ABS and NB latex, both of which have been enjoying positive margins, despite butadiene price rises in Q4 2020. NB latex has seen a boom from its use in medical gloves, with ABS also benefitting from medical applications.

In the European ABS markets, the lack of import volumes that drove market developments in H2 2020 is expected to continue in the opening months of 2021, fueling demand for domestic product, unless further coronavirus restrictions halt automotive and consumer appliance production. The return of imported material from Asia could rebalance the market but remains contingent on the gap between European and Asian ABS prices closing.

As MRC informed before, PrefChem received commercial ethylene and propylene at its new cracker in Pengerang on 13 September, 2019.

Butadiene is the main feedstock for the production of ABS.

According to the ICIS-MRC Price Report, January-September ABS imports to Russia increased by 3% year on year to 25,300 tonnes from 24,500 tonnes. The share of South Korean supplies was 63% (16,000 tonnes) versus 56% (13,600 tonnes) in January-September 2019.

Songwon: Global price increases due to higher freight rates

MOSCOW (MRC) -- Songwon announced on 7 December that prices for all its products will be raised by 2-5 %, depending on business line and region, according to GV.

The company said that these price increases are a consequence of the sudden escalation of freight rates that took place on most routes. The new prices are effective as of 1 January 2021, or as contracts allow.

Headquartered in South Korea, Songwon is the 2nd largest manufacturer of polymer stabilisers worldwide. The group also supplies a broad range of polyurethane-based products, among these thermoplastic polyurethanes (TPU) under the brand name Songstomer.

As MRC reported earlier, in August 2017, South Korean specialty chemicals company Songwon Industrial Co Ltd launched its new pilot plant in Panoli (Gujarat), thereby strengthening the organisation’s overall specialty chemicals development capability.

We remind that Russia's output of chemical products rose in October 2020 by 7.2% year on year. At the same time, production of basic chemicals grew in the first ten months of 2020 by 6.3% year on year, 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-October output. October production of polymers in primary form grew to 857,000 tonnes from 852,000 tonnes in September. Overall output of polymers in primary form totalled 8,340,000 tonnes over the stated period, up by 17% year on year.

Headquartered in Ulsan (South Korea), Songwon Industrial Co is a leader in the development, production and supply of specialty chemicals. The second largest manufacturer of polymer stabilisers worldwide, Songwon operates group companies all over the world, offering the combined benefits of a global framework and readily accessible local organisations.

Ineos declares force majeure on EO from plant in Germany

MOSCOW (MRC) -- Ineos Oxide, an Ineos subsidiary, has declared force majeure on supplies of ethylene oxide (EO) from its 280,000-metric tons/year plant in Cologne, Germany, reported Chemweek with reference to sources' statement to OPIS Thursday.

"We heard about the Ineos ethylene oxide force majeure earlier in the week," a market source said.

A declaration of force majeure was extended to other parts of the site at Dormagen in Cologne, including a 150,000-metric tons/year ethylene glycol (EG) plant, said other chemical market sources and IHS Markit analysts. Customers have been allocated 50% of their contractual EG volumes for December and January delivery, according to downstream sources.

Supplies of EG across Europe have tightened significantly over the last week, according to IHS Markit research and analysis associate director Lauren Zeiss. Inventory levels of EG are extremely low in Europe following a series of planned turnarounds and unplanned outages in the region, which started in September, said Zeiss.

As MRC informed before, the Ineos-operated 660,000-metric tons/year phenol-acetone plant in Gladbeck, Germany, was to restart by 10 December following planned maintenance. The producer shut the plant down for maintenance on 27 October until 6 December, according to the producer’s website. “They have not restarted yet, they should come back in 2-3 days,” says one source. “They are starting up right now and expect to be back online next week if all goes to plan,” the source said on 4 December. Ineos Phenol did not reply to a request on Monday seeking confirmation of the restart date. Ineos produces 409,000 metric tons/year of acetone at the Gladbeck site, according to IHS Markit data.

EO is primarily used as an intermediate in the production of several industrial chemicals. Ineos uses a large amount of the EO it produces to manufacture ethylene glycols, including monoyethylene glycol (MEG), which, in its turn, is used to produce polyethylene terephthalate (PET).

According to MRC's ScanPlast report, Russia's estimate PET consumption reached 59,310 tonnes in October 2020, down by 8% year on year. Overall PET consumption in Russia reached 589,580 tonnes in the first ten months of 2020, down by 20% year on year.

Ineos Group Limited is a privately owned multinational chemicals company consisting of 15 standalone business units, headquartered in Rolle, Switzerland and with its registered office in Lyndhurst, United Kingdom. It is the fourth largest chemicals company in the world measured by revenues (after BASF, Dow Chemical and LyondellBasell) and the largest privately owned company in the United Kingdom.