Feedstocks, energy in transition

MOSCOW (MRC) -- The global transition toward a lower-carbon future is rapidly changing the energy and feedstocks landscape for chemical and energy companies as they head into 2021. The pandemic caused worldwide crude oil demand to slump 10% in 2020, dramatically accelerating preparations by the refining sector to shift away from fuels toward a petrochemicals-centric future, reported Chemweek.

The world will still consume large amounts of oil for decades, but COVID-19 “reset world oil demand at a lower level,” says Jim Burkhard, vice president/crude oil markets at IHS Markit. Forecast global crude oil demand is now 3.5-4.0 million b/d less in the late 2020s compared with the pre-COVID outlook. “In our base case, world oil demand reaches a plateau in the mid-2030s. However, we do not rule out the possibility that 2019 was the peak in world oil demand, particularly if COVID-19 is not contained,” Burkhard said, speaking at the World Methanol Conference, held recently by IHS Markit in a virtual format. Last year may be remembered “as a pivot point when the energy transition moves from decades of slow motion to a faster pace of change,” he said.

The ongoing shift toward increased demand for oil as a petchems feedstock is forecast to gain momentum in 2021 on the back of recent capacity additions in China and the US, according to the latest oil market report by The Organization of the Petroleum Exporting Countries (OPEC; Vienna, Austria). Petchems feedstock and industrial fuels will gather pace as economic activity recovers, with “all products estimated to grow year on year following the steep impairment in 2020,” it says. Global oil demand will reach a projected 95.89 million b/d in 2021, it adds. OPEC projects that global oil demand declined by 9.77 million b/d in 2020 to 89.99 million b/d.

Total oil demand in China grew for five consecutive months to above 13 million b/d in October 2020, with “a strong performance in petrochemical feedstocks, with both liquefied petroleum gas (LPG) and naphtha outperforming other products,” it says. Naphtha demand in China grew by 290,000 b/d year-on-year (YOY) in October and LPG demand is also on a rising trend, growing by 600,000 b/d YOY, it says. Increased runs in propane dehydrogenation (PDH) plants due to steady demand for plastics supported LPG consumption. “Petrochemical feedstock, especially LPG, is expected to perform better than other fuels and will be a key driver for China’s oil demand growth in 2021,” it adds.

Oil demand growth in the Americas is projected to be well supported in 2021, led by “a healthy petrochemicals sector, with ethane-cracking capacity in the US estimated to provide solid support for demand growth,” OPEC says.

Worldwide base chemicals production is forecast to grow by 4.2% in 2021 after a decrease of 1.2% in 2020, according to ACC. Bulk petrochemicals and organics output, meanwhile, will rise an estimated 4.0% worldwide this year, following a decline of 2.4% last year, it says.

Total worldwide base chemicals demand is currently about 650 million metric tons/year (MMt/y), according to Dewey Johnson, global vice president/chemicals at IHS Markit. Demand plunged about 10 MMt in 2020 for the six major value chains of ethylene, propylene, methanol, chlorine, benzene, and para-xylene (p-xylene), which together represent about 80% of the total, but is expected to “recover significantly” starting in 2021, he says. Ethylene demand is expected to return to its pre-COVID growth of about 6 MMt/y in 2022.

The typical capacity-induced downcycle that the sector was already experiencing was exacerbated by the recession in 2020, Johnson said at IHS Markit’s recent Global Chlor-Alkali & Vinyls online event. Additional capacity will continue to enter the industry, and global chemical earnings by value chain are facing “a sharp decline in profitability for 2–3 years, with recovery by 2023–24,” he said. Chemicals demand growth will continue to be at GDP rate or above, however. “There will be a strong chemical upcycle expected in 2025–26,” Johnson said.

An acceleration in refinery rationalization has been seen around the world as a result of COVID-19 and this could impact feedstocks, says Duncan Clark, vice president/aromatics and fibers at IHS Markit. More than 3.0 million b/d of refining capacity is earmarked for closure in Asia, Europe, and North America, with more expected, he said at IHS Markit’s base chemicals forum in December.

“This should be of concern to aromatics producers, who potentially may face some shortages or the closure of their refinery and consequently a lack of feedstock, even from a virtual refinery linkage. Integrated refineries, aromatics, and petchem complexes have tended to perform better than the standalone refineries, but clearly this is going to be a risk going forwards,” Clark said.

As MRC informed earlier, Russia's output of chemical products rose in November 2020 by 9.5% year on year. At the same time, production of basic chemicals increased in the first eleven months of 2020 by 6.6% 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-November 2020 output. November production of polymers in primary form in Russia rose to 896,000 tonnes from 852,000 tonnes in October. Overall output of polymers in primary form totalled 9,240,000 tonnes over the stated period, up by 17.1% year on year.

According to MRC's ScanPlast report, Russia's estimated polyethylene (PE) consumption totalled 1,990,280 tonnes in the first eleven months of 2020, up by 1% year on year. Only high density polyethylene (HDPE) shipments increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 090,900 tonnes in the first eleven months of 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020). Supply of exclusively PP random copolymer increased.

Braskem partially resumes production at its unit in Mexico

MOSCOW (MRC) -- Brazilian petrochemicals producer Braskem reported in a document sent to the regulator that its Mexican unit, Braskem Idesa, partially resumed polyethylene production under the terms of an "experimental business model", reported CA Posts.

Braskem Idesa partially halted production last month following an interruption in natural gas supplies, after the federal government decided not to renew the ethane supply contract with the company. The outage caused the total suspension of the processes of its Ethylene XXI plant. The group said it will take legal action to defend its rights but that it cannot predict when the Mexican unit will be fully operational, given the uncertainty related to its gas supplies.

Since taking office at the end of 2018, the administration headed by Lopez Obrador has canceled or asked to review millionaire energy contracts , a policy that has generated concern among the main investment partners in the country, such as the United States, the European Union and Canada. In the case of Braskem Idesa, the national oil company Pemex accumulated millionaire penalties for failing to comply with the supply of natural gas to the Ethylene XXI petrochemical complex.

As MRC wrote before, Brazil’s state-run oil company Petrobras is seeking 800 million reais (USD152 million) in compensation from engineering group Odebrecht in arbitration proceedings over its alleged violation of the shareholders agreement in petrochemical company Braskem. Odebrecht is seeking to sell its 38.3% stake in Braskem SA, while Petrobras aims to offload its 36.1% stake.

We remind that Braskem is no longer pursuing a petrochemical project, which would have included an ethane cracker, in West Virginia. And the company is seeking to sell the land that would have housed the cracker. The project, announced in 2013, had been on Braskem's back burner for several years.

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

According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

Headquartered in Rio de Janeiro, Petrobras is an integrated energy firm. Petrobras' activities include exploration, exploitation and production of oil from reservoir wells, shale and other rocks as well as refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons, in addition to other energy-related activities.

MRC team wishes Merry Christmas and Happy New Year!

MOSCOW (MRC) -- Dear readers of MRC!

We congratulate you on Christmas and New Year!

We wish you every happiness this Holiday season and throughout the coming year.

All of MRC staff join in saying "thank you" and wishing you a happy holiday and prosperous new year.

On this special day, we wish you happiness, prosperity and success, hoping that we continue our association through many more wonderful years ahead!

Best wishes,

MRC staff.


Cangzhou Dahua starts up new PC plant in China

MOSCOW (MRC) -- China's Cangzhou Dahua New Material has announced that it has started up its new polycarbonate (PC) plant at Cangzhou in Hebei province, according to Equalocean.

The new facility can produce 100,000 mt/year of PC. The company has already achieved on-spec production at this plant.

The project will help to improve Cangzhou Dahua's advantages and competitiveness, as per the company's statement.

Construction of the new PC plant began in early 2019.

As MRC reported earlier, the total investment for the plant is estimated at CNY2.1bn (US298m), although initially it was planes at CNY1.6bn.

According to MRC's ScanPlast report, Russia's estimated consumption of PC granules (excluding imports and exports to\\from Belarus) rose in January-November 2020 by 18% year on year to 83,600 tonnes (70,600 tonnes a year earlier).

Sabic requests term limit for Clariant board members

MOSCOW (MRC) -- Clariant’s biggest shareholder, Saudi Basic Industries Corporation, on Monday re-ignited a battle over the Swiss chemicals maker’s future by seeking a 12-year board member term limit that would force Chairman Hariolf Kottmann’s ouster, said Reuters.

SABIC, which owns 31.5% of Clariant, asked for the new term limit, including for the chairperson, to be added to the agenda of the annual general meeting of shareholders scheduled for April 7. Aramco-controlled SABIC also proposed a special dividend distribution of 2 Swiss francs per share, Clariant said in a statement, which would total roughly 670 million francs (USD753 million).

That could drain the company’s coffers that new CEO Conrad Keijzer might otherwise use to bulk up via acquisitions that he has said are a priority. Kottmann, who became CEO and joined Clariant’s board in 2008, has been at odds with SABIC since a proposed joint venture between the two companies collapsed in 2019 over disagreements over the price of the Saudi Arabian company’s assets.

The sudden departure of Ernesto Ochiello, a longtime SABIC executive who quit as Clariant CEO in July 2019 after less than a year in the job, further signalled differences between Kottmann and his top shareholder.

Ochiello returned to SABIC after leaving Clariant. A Clariant spokesman said the Swiss company and SABIC continued to have a “professional relationship”, and the Saudi company remained an important customer. He said Clariant’s board would discuss SABIC’s proposals at an upcoming meeting.

Clariant, which is selling its pigments unit and cutting 1,000 jobs amid plans to dispose of divisions that make up two-thirds of annual sales, confirmed adoption of the term limits at the shareholders meeting would force Kottmann out, though other board members have several years before they would be affected.

As MRC informed earlier, Sabic intends to raise the prices of acrylonitrile butadiene styrene (ABS) and polycarbonate (PC) in the United States from January 11. The company increases the prices of LEXAN PC by 20 cents per kg (USD198 per ton), PC compound and CYCOLOY ABS by 20 cents per kg (USD198 per ton), CYCOLAC ABS by 20 cents per kg (USD198 per ton), PC GELOY ASA at 20 cents per kg (USD198 per tonne).

According to MRC's ScanPlast report, Russia's estimated consumption of PC granules (excluding imports and exports to\\from Belarus) rose in January-November 2020 by 18% year on year to 83,600 tonnes (70,600 tonnes a year earlier).

The Saudi Basic Industries Corp (SABIC), established in 1976, is a diversified company manufacturing chemicals and intermediates, industrial polymers, fertilizers and metals. Today SABIC is the largest industrial concern in the Persian Gulf, producing about 10% of all world petrochemical products. The state owns 70% of the share capital of SABIC.