Traders accelerate oil sales from floating storage to meet Asia demand

MOSCOW (MRC) -- Traders have accelerated crude oil sales from floating storage in December to meet higher demand in Asia as the region’s refineries throttled up for peak winter consumption, reported Reuters with reference to trade sources and analysts' statement.

The drop in excess global stored oil and a sudden decision by world’s top exporter Saudi Arabia for extra output cuts in the next two months are expected to keep supplies snug and support prices.

“Oil prices are up, and backwardation has widened in expectation of a tighter crude market,” said Serena Huang, Asia lead analyst at data analytics firm Vortexa.

“We could expect to see traders accelerating the sell off of physical barrels that they are holding in storage.”

The rollout of COVID-19 vaccines has also lifted hopes for fuel demand recovery in 2021 and flipped Brent’s market structure into backwardation, reducing incentives for traders to store oil. Backwardation refers to higher prompt prices versus those in future months.

Global floating storage drew by the most in December last year with the average monthly volume down by 25.8 million barrels versus November, data from analytics firm Vortexa showed.

Floating storage levels fell further at the start of 2021 to about 78 million barrels, the lowest since April when the COVID-19 pandemic ravaged fuel demand, the data showed.

Asia’s major buyers, India, China and Japan, imported a high volume of crude in December, data on Refinitiv Eikon showed, as refiners replenish stockpiles while their overall refining output has returned to or even exceeded pre-COVID-19 levels.

“A lot has been sold from storage. Some traders have no floating cargoes left already,” said a trader with an Asia refinery.

Asia, which accounts for more than 60% of global crude floating storage, had 60.9 million barrels at the end of December, down 37% from October, according to Vortexa.

Data intelligence firm Kpler said Asia’s crude in floating storage was about 64 million barrels last month, which compares with 149 million barrels in late August, but still far from average levels of 20 million barrels seen in 2018-2019.

Vortexa’s Huang said floating crude storage was unlikely to return to 2020 highs, as a bumpy oil demand recovery is expected to gather pace this year, which would lift tanker demand and support freight rates, a key cost component for floating storage.

Homayoun Falakshahi, oil and gas analyst at Kpler, said: “The current forward curve isn’t incentivising storage, so traders will want to release stored crude.”

“Key things to watch will be how quick vaccines are diffused and the length of current lockdowns.”

As MRC wrote previously, China's crude oil throughput in November 2020 rose 3.2% on year, setting a record high on a daily basis, as a huge private refiner started trials of a new refining unit and state-owned refineries raised processing rates to meet annual targets. The country processed 58.35 million tonnes of crude oil in November, equivalent to 14.2 MMbpd, according to data from the National Bureau of Statistics (NBS) on 15 December, 2020. That exceeded the October record of 14.09 MMbpd. January-November throughput was 614.41 MMt, or 13.39 MMbpd, up 3.1% from the same period in 2019. Zhejiang Petrochemical Corp in early November started a 200,000 bpd crude unit, in addition to its existing 400,000 bpd refining capacity in eastern China.

We remin that in January 2020, Zhejiang Petroleum & Chemical Co Ltd, one of two new major refineries built in China in 2019, started up the remaining units in the first phase of its refinery and petrochemical complex. The complex is situated in east China’s Zhoushan city. The company, 51% owned by private chemical group Zhejiang Rongsheng Holdings, said it ha started test production at ethylene, aromatics and other downstream facilities, without giving further details.

Zhejiang Petrochemical started the first 200,000 barrels per day (bpd) crude processing unit in late May, 2019, following on from the start of a 400,000-bpd refinery owned by another private chemical major Hengli Petrochemical. The newly started units at Zhejiang Petrochemical should include a second 200,000-bpd crude unit, a 1.2 million tonnes per year (tpy) ethylene unit and a 2 million tpy paraxylene unit, according to several industry sources with knowledge of the plant’s operations.

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.

Russia may start exporting Belarusian oil products in 2021

MOSCOW (MRC) -- Russian deputy prime minister Alexander Novak said Jan. 4 that export of Belarusian oil products via Russian may begin in 2021, reported S&P Global.

"I think 2021 is a very realistic timeframe for deliveries to begin," Novak said in an interview aired on Russian business channel RBC.

In September Novak said that deliveries of Belarusian oil products could reach 4-6 million mt, considering spare capacity at ports in North Western Russia including Primorsk, Saint Petersburg and Ust-Luga.

Russia and Belarus have been discussing exports via Russia since September, after Lithuania imposed sanctions on Belarus. The measures were introduced in response to allegations that presidential elections were not free and fair, and a subsequent crackdown on protests against the result, which saw Alexander Lukashenko remain in office.

In mid December the Lithuanian port of Klaipeda said that Belarusian Oil Company was temporarily suspending oil products exports via the port. Belarus has also used Klaipeda to receive deliveries of crude from alternative suppliers, including Norway, Saudi Arabia and the USA in 2020, when Russia cut deliveries to Belarus over a dispute on supply terms.

According to MRC's DataScope report, overall polypropylene (PP) imports into Belarus rose in the first ten months of 2020 by 6% year on year to 95,500 tonnes. At the same time, homopolymer of propylene (homopolymer PP) accounted for the greatest increase in demand. October PP imports to the Republic of Belarus were 11,600 tonnes, which virtually corresponded to the same figure a month earlier. Local companies maintained high volumes of purchases of all grades of propylene polymers in Europe and Russia. Overall imports of propylene polymers reached 95,500 tonnes in January-October 2020, compared to 90,000 tonnes a year earlier; demand only for homopolymer PP increased, whereas demand for propylene copolymers decreased.

Trinseo raises January PS, ABS and SAN prices in Europe

MOSCOW (MRC) -- Trinseo, a global materials company and manufacturer of plastics, latex binders, and synthetic rubber, and its affiliate companies in Europe, have announced a price increase for all polystyrene (PS), acrylonitrile-butadiene-styrene (ABS) and acrylonitrile-styrene copolymer (SAN) in Europe, according to the company's press release as of 5 January.

Effective January 1, 2021, or as existing contract terms allow, the contract and spot prices for the products listed below rose as follows:

- STYRON general purpose polystyrene grades (GPPS) -- by EUR135 per metric ton;
- STYRON and STYRON A-Tech and STYRON X- Tech and STYRON C- Tech high impact polystyrene grades (HIPS) - by EUR135 per metric ton;
- MAGNUM ABS resins - by EUR400 per metric ton;
- TYRIL SAN resins - by EUR170 per metric ton.

As MRC informed before, Trinseo last raised its prices for all PS and ABS and and grades on 1 December 2020, as stated below:

- STYRON GPPS -- by EUR250 per metric ton;
- STYRON and STYRON A-Tech and STYRON X- Tech and STYRON C- Tech HIPS - by EUR250 per metric ton;
- MAGNUM ABS resins - by EUR305 per metric ton.

According to ICIS-MRC Price report, in Russia, at the beginning of 2021, prices of Nizhnekamskneftekhim's material will increase by Rb10,000/tonne under the pressure from feedstock prices and strong demand in the PS market and will reach their maximum over the past two years. Penoplex plans to raise prices of its material by Rb10,000-12,000/tonne. On the back of this, Gazprom neftekhim Salavat is also expected to raise its PS prices after the New Year holidays. The shortage of material will remain next month.

Trinseo is a global materials company and manufacturer of plastics, latex and rubber. Trinseo's technology is used by customers in industries such as home appliances, automotive, building & construction, carpet, consumer electronics, consumer goods, electrical & lighting, medical, packaging, paper & paperboard, rubber goods and tires. Formerly known as Styron, Trinseo completed its renaming process in 1Q 2015. Trinseo had approximately USD3.8 billion in net sales in 2019, with 17 manufacturing sites around the world, and approximately 2,700 employees.

W.R. Grace to review revised 40 North takeover bid

MOSCOW (MRC) -- W.R. Grace says it will review a newly-received USD65/share bid to acquire all outstanding shares in the company from private investment fund 40 North Management (New York, New York), reported Chemweek.

The offer values the company at about USD4.3 billion. It comes two months after Grace rejected a USD60/share, USD4-billion acquisition offer from 40 North in November.

Grace will consider strategic alternatives as part of its review of the latest bid from 40 North. The company’s board will “carefully review and evaluate the proposal,” Grace say. “As part of this review, the board will consider the proposal in the context of the company’s ongoing review of potential strategic alternatives to maximize shareholder value.”

40 North owns a 14.9% stake in Grace and has two seats on the board following an agreement reached in 2019.

40 North released a letter criticizing Grace’s rejection of its earlier offer, which the fund says was “summarily dismissed.” The letter adds that “since that time, (Grace has) neither engaged with us, nor made any public statement about opportunities Grace is pursuing to maximize value.”

The offer represents a 16% premium on Grace’s 11 January closing price, and a 48% premium on Grace’s 6 November closing price, prior to when 40 North’s initial offer was announced.

40 North reiterated its criticisms of Grace, saying that the company’s stock has under-performed since the spin-off of Grace Construction Products (GCP) in 2016, due largely to environmental declines and environmental liabilities. “Grace offers a strong and unique - but unrealized - value proposition that can make it a standout player in the world of specialty chemicals,” 40 North says. “Allowing the Company to continue along its current path, however, guarantees only that the value destruction at Grace will continue and worsen, consistent with its track record since the spin-off of GCP in 2016.”

Going private can enable Grace “to quickly and decisively undertake critical actions to arrest its steady decline and turn the tide towards enhanced profitability and growth,” the fund’s letter adds.

Goldman Sachs and Moelis & Company are acting as Grace’s financial advisors in reviewing the proposal, while Wachtell, Lipton, Rosen & Katz is its legal advisor. Citi and J.P. Morgan are acting as financial advisors to 40 North.

As MRC wrote before, in October 2020, W. R. Grace & Co. licensed UNIPOL PP process technology to Dongguan Grand Resource for two additional lines. This is part of the continued investment in UNIPOL PP Process Technology lines by DGR. The first license was signed in 2016. Building additional capacity at the same site will help DGR further optimize costs, shorten construction time, and broaden their product portfolio.

We also remind that in April 2018, W. R. Grace & Co. completed the USD416 million acquisition of the Polyolefin Catalysts business of Albemarle Corporation.

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.

A leader in polyolefin catalysts and licensing, W.R. Grace has the world’s broadest portfolio of polypropylene and polyethylene catalyst technologies used to produce thermoplastic resins for a variety of applications. A leading innovator and strategic partner to its customers, Grace supplies catalyst solutions for all polyolefin processes, as well as polypropylene process technology and process controls. Grace employs approximately 3,700 people in over 30 countries.

PPG to acquire German industrial coatings maker

MOSCOW (MRC) -- PPG Industries announced it will acquired Worwag (Stuttgart, Germany), a producer of liquid, powder and film coatings for industrial and automotive applications, said Chemweek.

Terms of the transaction, including purchase price, have not been disclosed. The deal is expected to close in the first half of this year.

Worwag, a family-owned business, has operations in several countries in Europe, the Americas and Africa, and generates about EUR220 million/year (USD269 million) in revenue. It has about 1,100 employees.

"The addition of Worwag will also enhance PPG’s waterborne, direct-to-metal, liquid and powder coatings offerings, and allow us to further expand current customer distribution in key geographies," says Rebecca Liebert, executive vice president at PPG.

The deal is the second substantial acquisition announced by PPG this year, and the fourth since mid-November, including the USD1.52-billion acquisition of Finnish decorative coatings producer Tikkurila.

As MRC informed earlier, PPG said 24 December that it has completed the acquisition of specialty transport coatings maker Ennis-Flint.

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.