COVID-19 - News digest as of 14.01.2021

1.Orion raises fourth-quarter guidance on higher volumes, inventory restocking

MOSCOW (MRC) -- Orion Engineered Carbons has raised its fourth-quarter guidance for adjusted EBITDA earnings to a range of USD64-67 million from the previously issued range of USD44-55 million given during its third quarter results on 5 November, said Chemweek. The upwards adjustment by the carbon black producer is predominantly attributable to our specialty carbon black business unit, driven by considerably higher volumes, which rose low-double digits sequentially, says Orion's CEO Corning Painter. The company also experienced 'slightly less' seasonality than anticipated in its rubber carbon black business, where volumes declined mid-single digits sequentially, he says. "We believe both of these trends are an indication that our customers restocked their inventories, to some degree during the quarter, to better manage their supply chains," he adds. The temporary nature of restocking, combined with broader uncertainties in the economy, make it difficult to forecast how demand will develop from now on, according to Painter. "However, our current order book indicates a strong January and we expect robust demand as the global economy recovers," he says.


Synthomer raises full-year earnings guidance on strong finish to 2020

MOSCOW (MRC) -- Synthomer (Harlow, UK) has raised its guidance for full financial year 2020 EBITDA earnings by 10% compared to its prior forecast due mainly to a stronger trading performance in the fourth quarter, said Chemweek.

The company’s board has also been informed by CEO Calum MacLean that he intends to stand down as CEO by January 2022. In a trading update issued ahead of Synthomer’s scheduled release of its full-year results on 4 March, the company says a combination of stronger trading across its three major divisions means it now expects EBITDA for 2020 to be approximately GBP255 million (USD348 million), about 10% ahead of previous guidance issued mid-October.

Synthomer’s performance elastomers business has “continued to perform strongly,” it says. Positive trends seen in its nitrile latex business during 2020 continued through the fourth quarter, with overall performance “ahead of expectations,” it says. Conditions in its styrene-butadiene rubber (SBR) latex business also continued to strengthen in the quarter, with all SBR segments except paper trading ahead of the prior-year period.

The functional solutions business also saw a sustained improvement in the fourth quarter, with Synthomer’s consumer-facing and industrial end-markets “remaining strong, with exception of the oil and gas business unit,” it says. “We have seen activity levels above normal seasonal levels with overall performance ahead of expectations,” it adds.

The company’s industrial specialties segment also saw a strong finish to the year, with the laminates and films business “trading particularly well” and the division performing ahead of the equivalent quarter in 2019, it says. Synthomer remains “highly cash generative” and now expects its proforma leverage to reduce to 1.9x net debt to EBITDA as of 31 December 2020, according to the company.

In a brief outlook, it says that while it will continue to adapt its operations in response to the ongoing COVID-19 pandemic, it expects “no meaningful disruption to business. The board is confident that the benefits of the Omnova acquisition, recent investment in new capacity, further efficiency measures, its proven growth strategy as well as continued strength in performance elastomers, will underpin strong EBITDA growth in 2021.” Synthomer completed its acquisition of Omnova Solutions in April 2020.

CEO MacLean intends to stand down in January next year after six years in the role, once a successor is in place. The process to find a new CEO is already underway, says the company.

As per MRC, Synthomer (Harlow, UK) says it has decided to close its styrene-butadiene-rubber (SBR) production site at Oulu, Finland, by the end of the first quarter of 2021. The company confirmed in August that it was in a consultation process with employees at Oulu concerning future options for the facility.

According to MRC's ScanPlast report, September total production of unmixed PVC grew to 86,000 tonnes from 75,500 tonnes a month earlier, SayanskKhimPlast and RusVinyl increased their capacity utilisation. Overall output of polymer were 718,500 tonnes in the first nine months of 2020 versus 720,500 tonnes a year earlier, only two producers raised their production volumes, and RusVinyl cut its output.

Crude oil futures rise on large US stock draw, weakening dollar

MOSCOW (MRC) -- Crude oil futures rose in mid-morning trade in Asia Jan. 13 on a larger-than-expected draw in US crude inventories and a weakening US dollar, reported S&P Global.

At 10:29 am Singapore time (0229 GMT), the ICE Brent March contract was up 55 cents/b (0.97%) from the Jan. 12 settle at USD57.13/b, while the February NYMEX light sweet crude contract was up 49 cents/b (0.92%) over the same period at USD53.70/b. The markers had risen 1.65% and 1.84%, respectively, on Jan. 12.

American Petroleum Institute data released Jan. 12 showed a 5.821 million-barrel decline in US crude inventories for the week ended Jan. 8. This was larger than expected; analysts surveyed by S&P Global Platts had predicted a 3.8 million-barrel draw.

The API data also showed a 1.876 million-barrel build in gasoline and 4.433 million-barrel build in distillate inventories, but the market ignored these indications of depressed fundamentals in downstream markets.

At 10:29 am, the NYMEX February RBOB contract was trading 1.64 cents/gal (1.06%) higher than the Jan. 12 settle at USD1.5694/gal, and the NYMEX February ULSD contract was up 1.24 cents/gal (0.78%) over the same period at USD1.6091/gal.

Market participants are awaiting the release of more comprehensive inventory data by the US Energy Information Administration slated for later in the day for confirmation of the draw.

Analysts noted that oil prices were also benefitting after the US dollar resumed its downtrend after a brief rally.

"Crude oil prices gained as a weaker USD saw investor appetite improve. The recent strength in the USD has been a headwind for commodity markets over the past week; although underlying fundamentals have helped offset it," ANZ analysts said in a Jan. 13 note.

Amid tightened supply outlooks following Saudi Arabia's 1 million b/d production cut and upward-trending demand projections, the EIA in its monthly Short-Term Energy Outlook released Jan. 12 revised its crude price forecast higher.

The EIA now expects Brent crude prices to average USD52.75/b in 2021, up USD4.25/b from its December forecast, and the WTI price to average USD49.75/b, up USD4/b.

Despite the upward revision, the EIA's forecast remains less bullish than some banks including Citibank, which sees Brent crude averaging USD59/b in 2021 and WTI USD56/b.

As MRC informed previously, global oil demand may have already peaked, according to BP"s latest long-term energy outlook issued in September 2020, as the COVID-19 pandemic kicks the world economy onto a weaker growth trajectory and accelerates the shift to cleaner fuels.

Earlier last 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 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.

Russian petrochemical producers are well-positioned for market recovery post-COVID-19

MOSCOW (MRC) -- The COVID-19 outbreak has led to an unprecedented decline in demand affecting all sections of the Russian economy, which has impacted the demand for petrochemicals in the short-term. However, the pandemic triggered an increase in the demand for polymers in food packaging, and cleaning and hygiene products, according to Hydrocarbonprocessing with reference to GlobalData, a leading data and analytics company.

With Russian petrochemical companies having the advantage of access to low-cost feedstock, and proximity to demand-rich Asian (primarily China) and European markets for the supply of petrochemical products, these companies appear to be well-positioned to derive full benefits from an improving market environment and global economy post-COVID-19, says GlobalData.

Dayanand Kharade, Oil and Gas Analyst at GlobalData, comments: “Oil and gas majors in the country are reducing spend in response to a substantial drop in crude prices and disruptions caused by the COVID-19 outbreak. Sibur Holding, one of the largest petrochemical producers in Russia, has lowered its capital expenditure (capex) outlook for 2020, which is approximately 30% lower in comparison to its initial budget. However, companies continue to evaluate their capital structure and focus on key projects ensuring sustainable growth.”

The majority of the upcoming projects in Russia are in the early stages of development, for example, pre-construction phase. Changes in supply/demand patterns, due to reduced economic activity across the globe, is likely to affect the pace of progress of these projects. Major announced projects such as Baltic Chemical project and EuroChem- Northwest Kingisepp project in Leningrad Oblast, and Gazprom and Novatek projects in Yamalo-Nenets Autonomous Okrug could face delays in startup. However, companies should continue to assess the impact based on prospective developments.

Kharade concludes: “With economic growth correlated to petrochemicals growth, the short-term outlook is expected to result in lowered petrochemical demand in the country. However, with an improving market environment, Russian producers are well-positioned to derive full benefit with the country’s access to low-cost feedstock.”

As MRC reported before, in December 2020, Sibur, Gazprom Neft, and Uzbekneftegaz agreed to cooperate on potential investments in Uzbekistan including a major expansion of Uzbekneftegaz’s existing Shurtan Gas Chemical Complex (SGCC) and the proposed construction of a new gas chemicals facility. The signed cooperation agreement for the projects includes “the creation of a gas chemical complex using methanol-to-olefins [MTO] technology, and the expansion of the production capacity of the Shurtan Gas Chemical Complex”.

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.

Nanjing Yangzi shuts two rubber plants after fire

MOSCOW (MRC) -- China's Nanjing Yangzi Petrochemical Rubber, part of Sinopec Group, shut its 100,000 mt/year butadiene-rubber unit and 100,000 mt/year styrene-butadiene-rubber plant in Jiangsu province Jan. 12 following a fire at the petrochemical complex, reported S&P Global with reference to a source with direct knowledge of the matter's statement Jan. 13.

The fire was extinguished on Jan. 12, according to the source.

The rubber plants may remain shut for two to three months, the source said, but this could not be officially confirmed with the company.

As MRC informed earlier, Sinopec Corp's Qilu refinery resumed operations after a more than three-month overhaul of its 160,000 barrels per day (bpd) crude processing facility, according to the company's statement on 17 December, 2020. The refinery, based in China's oil refining hub Shandong province, has total crude oil processing capacity of 13 million tonnes per year, or 260,000 bpd.

Butadiene is the main feedstock for the production of acrylonitrile-butaiene-styrene (ABS).

According to ICIS-MRC Price report, ABS imports into Russia rose in the first eleven months of 2020 by 2% year on year to 32,000 tonnes from 31,300 tonnes a year earlier. South Korean shipments accounted for 62% (19,900 tonnes) in January-November 2020 versus the share of 58% (18,200 tonnes) a year earlier.

China Petrochemical Corporation (Sinopec Group) is a super-large petroleum and petrochemical enterprise group established in July 1998 on the basis of the former China Petrochemical Corporation. Sinopec Group"s key business activities include the exploration and production of oil and natural gas, petrochemicals and other chemical products, oil refining.