Sumitomo Chemicals net income falls, petchems segment swings to loss

MOSCOW (MRC) -- Sumitomo Chemical reports a 19% fall year on year (YOY) in net income to Yen 54.13 billion (USD523.0 million) for the fiscal first nine months ended 31 December 2020, on sales that declined Yen 8.1 billion to Yen 1.64 trillion, according to Chemweek.

The company does not disclose separate financial figures for the third quarter.

Net income attributable to owners of the parent company declined 41% YOY to Yen 21.94 billion, while operating profit fell 9% to Yen 116.64 billion, it says. Substantial sales declines in Sumitomo’s petrochemicals/plastics and energy/functional materials businesses in the first nine months were partially offset by increases in revenue for its pharmaceuticals, health and crop sciences, and electronic chemicals segments.

In its petchems and plastics business, Sumitomo says shipments of synthetic resins mainly for automotive use declined YOY, while a drop in market prices for raw materials saw petchem product prices hover at a lower level, due primarily to the economic downturn related to the COVID-19 pandemic. Sales plunged Yen 109.9 billion compared to the prior-year period to Yen 408.4 billion, with core operating income swinging to a loss of Yen 27.9 billion, down Yen 55.2 billion YOY. The operating loss was due mainly to lower shipment volumes, deteriorated petchem margins, and periodic shutdown maintenance at its Rabigh Refining and Petrochemical Co. (Rabigh, Saudi Arabia) joint venture with Aramco, it says.

In its energy and functional materials business, declining shipments of materials for automotive use, including separators for lithium-ion secondary batteries and synthetic rubber, resulted in a Yen 15.3 billion fall YOY in sales to Yen 175.4 billion. Core operating income fell by Yen 2.1 billion compared to the equivalent period last year to Yen 15.6 billion.

Sales rose Yen 35.3 billion YOY to Yen 417.5 billion in Sumitomo’s pharmaceuticals business, driven mainly by increased sales in Japan and North America, with core operating income increasing YOY by Yen 7.2 billion to Yen 74.7 billion.

Electronic chemicals shipments of processing materials for semiconductors, including high-purity chemicals and photoresists, increased due to growing demand, while shipment of materials for display applications also rose as a result of rising stay-at-home and tele-work demand, it says. Sales increased by ?19.3 billion compared to the prior-year period to Yen 324.3 billion, with core operating income rising by Yen 13.2 billion YOY to Yen 31.8 billion.

In the health and crop sciences business, crop protection product sales rose YOY following the acquisition in April 2020 of four Nufarm subsidiaries in South America, while shipments to India also performed well, it says. Revenue grew Yen 63.9 billion YOY to Yen 282.4 billion, with core operating income swinging to a core operating profit of Yen 12.2 billion, up Yen 25.8 billion YOY.

As MRC reported earlier, in December 2020, Sumitomo Chemical and Axens signed a license agreement of ethanol-to-ethylene technology Atol for Sumitomo Chemical’s waste-to-polyolefins project in Japan. In the project, to promote circular economy, Axens’ Atol technology will transform ethanol produced from waste into polymer-grade ethylene that will be polymerized in Sumitomo Chemical’s assets into polyolefin, a key product in the petrochemical industry.

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.

Global oil demand to rise, boosted by vaccine distribution and economy

MOSCOW (MRC) -- Global oil demand is expected to rise by nearly 7% this year, boosted by quicker vaccine distribution and a better economic outlook, reproted Reuters with reference to consultancy Wood Mackenzie's statement.

Total liquids demand is expected to average 96.7 million barrels per day (bpd) in 2021, 6.3 million bpd higher than last year when the Covid-19 pandemic caused an unprecedented oil demand shock.

“Our short-term forecast assumes vaccine distribution accelerating through 2021 and is underpinned by 5% expected growth in global GDP, according to our macroeconomic outlook, following the global economy’s 5.4% contraction last year,” said the consultancy’s vice president, Ann-Louise Hittle.

“The pace and strength of the global liquids demand recovery will depend on the pace of Covid-19 vaccine distribution and global economic recovery.”

In terms of supply, WoodMac expects oil output from the US Lower 48 states to reduce by about 500,000 bpd this year, moderating from last year’s decline.

Rig activity is expected to continue to rise but much of the recovery rate will be dependent on oil prices and the industry’s willingness to spend on volume growth again, WoodMac said.

It added that decisions by the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, will be a huge uncertainty.

“Can OPEC+ negotiate deals each month and remain committed to production restraint? Some production restraint is needed in 2021 for market balance, but compliance could wane with demand recovery,” Hittle said.

Still, despite the potential increase in oil demand, refinery utilisation this year is expected to remain low, amid the ongoing pandemic, OPEC+ production cuts and new capacity additions, WoodMac said.

Over one million bpd of refining capacity will be completed this year in the Middle East and Asia, which could threaten further refinery rationalisation.

Refineries under the threat of closure could repurpose the facilities to produce liquid renewables instead of converting into a terminal, which could help oil companies’ aim of achieving carbon neutrality.

As MRC informed previously, in November 2020, Sinopec established strategic cooperation with three top institutions in Beijing, China, to take lead in a joint research on the energy and chemical industry’s carbon emissions peak and carbon neutrality. Sinopec invited thought leaders and experts in the fields of climate change, energy and chemical industry to conduct in-depth research on the strategic path of having CO2 emissions peak and achieve carbon neutrality before 2030 following China’s action plan.

We remind that in H1 October, 2020, China's Sinopec started operation of a 800,000 tons-per-year ethylene facility at its Zhanjiang refinery. The refinery, located in the southern Chinese coastal city of Zhanjiang, commenced operation of its 200,000 barrel per day crude oil refining units in June.

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.

Crude oil lacks direction amid US inventory draw, pandemic demand concerns

MOSCOW (MRC) -- Crude prices lack direction Jan. 27 as the market weighed a bullish US crude draw against pandemic-dimmed demand outlooks, reported S&P Global.

NYMEX March WTI settled up 24 cents at USD52.85/b, and ICE March Brent was down 10 cents at USD55.71/b.
US commercial crude inventories declined 9.91 million barrels during the week ended Jan. 22 to a 10-month low of 476.65 million barrels, according to US Energy Information Administration data released Jan. 27. It was the largest one-week draw since the week ended July 24 and left inventories just 6% above the five-year average, the narrowest supply overhang since early April.

The draw far-exceeded American Petroleum Institute data released late Jan. 26 showing a 5.3 million-barrel crude draw over the same period.

The US crude draw sent oil futures higher midday, but the market later gave up these gains amid weakened economic outlooks.

"Oil has been rangebound for the past few weeks and it seems like nothing will change unless something major happens on the COVID front," OANDA senior market analyst Edward Moya said in a note. "Crude prices could surge higher if Europe gets their vaccine rollouts heading in the right direction or tank if virus variants shutdown China and other countries that have been successfully reopening."

NYMEX February RBOB settled down 36 points at USD1.5771/gal, while February ULSD finished up 1.05 cents at USD1.6089/gal.

The number of daily COVID-19 deaths in the US climbed to a new high of 4,205 on Jan. 26, according to New York Times data, but as the number of new cases steadily declines, states have begun easing lockdown restrictions.

New York governor Andrew Cuomo on Jan. 27 announced restrictions on nonessential businesses and indoor dining would be lifted across much of the state. The move comes on the heels of California on Jan. 25 lifting a regional stay-at-home order that affected the vast majority of state residents.

Outside of the US, however, the pandemic situation remained grim. In Europe, countries are considering greater restrictions to curb the spread of the virus, whereas in Asia, demand-side concerns remain heightened following an outbreak in China.

Already, authorities in China have called upon citizens to not travel during the Lunar New Year Holiday, souring sentiment in the oil markets.

"While the general upward direction of travel in the market makes sense, it's difficult for oil traders to make a definitive near-term shift to the next price level higher given the very uncertain near-term demand outlook," surmised Stephen Innes, chief global markets strategist at Axi, in a Jan. 27 note.

US gasoline cracks weakened as stockpiles rose amid an unexpected dip in demand. The ICE New York Harbor RBOB crack against Brent edged down 7 cents to around USD10.16/b in afternoon trading.

Total gasoline inventories climbed 2.47 million barrels to 247.69 million barrels in the week ended Jan. 22, EIA data showed, as implied demand slipped 3.4% to 7.83 million b/d. The counter-seasonal decline left demand nearly 12% behind the five-year average, in line with levels seen earlier this month.

Notably, Apple Mobility data shows that US driving activity was higher for a third straight week last week, climbing nearly 2% from the week prior and up nearly 3% from a late-December nadir. This discrepancy suggests a possible disconnect between actual end user demand and the EIA figures, which are a proxy based on product disappearing from primary sources..

As MRC informed previously, oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, according to an official with International Energy Agency's (IEA) statement.

We remind that 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 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.

We also remind that 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.

Dow tops estimates as volumes return to pre-pandemic levels

MOSCOW (MRC) -- Dow Inc. topped analyst consensus with volume reaching pre-pandemic levels in all operating segments. The company reported fourth-quarter net income of USD1.3 billion compared with a year-ago loss of USD2.3 billion; year-ago results reflected the impact of a USD2.9 billion restructuring charge, reported Chemweek.

Operating EBIT was USD1.1 billion, up 2% year-on-year (YOY). Net sales of USD10.7 billion were up 5% YOY. Reported adjusted operating earnings were 81 cts/share, 17% above analyst consensus estimates as reported by Zacks.

"The big driver was strong volume and price," said Dow president and CFO Howard Ungerleider. "Year-on-year (Dow volumes) returned to pre-pandemic levels and there was also really strong momentum sequentially." Dow says sales increased 10% sequentially versus the third quarter as global economic recovery continued. Packaging and specialty plastics as well as industrial intermediates and infrastructure drove the growth, Ungerleider says. "Basically, volumes are back to where they were last year. And margins are pretty close. Not back for every business on margin, but at the enterprise level margins are back." The business areas that have lagged are on home and personal care, which has been "just a little bit of a drag on our performance materials business," Ungerleider said.

Overall volume increased 1% YOY led by demand growth in the packaging & specialty plastics as well as performance materials & coatings segments. Volume increased 2% sequentially driven by strong supply and demand fundamentals.

Packaging & specialty plastics segment net sales were USD5.1 billion, up 6% YOY. Operating EBIT was USD780 million, up 20% YOY on strong pricing. Volume increased 2%, primarily driven by olefin end-market demand, Dow said. Improved supply/demand fundamentals in polyethylene, was partly offset by lower ethylene and hydrocarbon co-product prices, Dow said. On a sequential basis, the segment recorded a 12% net sales improvement and a 4% volume gain, primarily driven by continued strong pricing momentum.

Industrial intermediates & infrastructure net sales were USD3.5 billion, up 8% YOY. Operating EBIT was USD296 million, up 34% YOY due to strong supply and demand fundamentals in polyurethanes & construction chemicals and at Sadara. Strong construction and manufacturing demand were offset by downward pressure from supply limitations, Dow said. Sales were up 14% sequentially and volume up 2% with significant price improvement in polyurethanes and robust demand in Industrial solutions.

Performance materials & coatings net sales were USD2 billion, approximately flat with the year-ago period. Operating EBIT was USD50 million, down 79% as volume growth in silicones and coatings applications, more than offset by price and volume declines in siloxanes. Segment sales were up 1% sequentially and volume down 2% on strong demand for silicones and acrylic monomers pricing momentum, more than offset by coatings seasonal demand declines.

“Dow enters 2021 with sequential momentum and is well-positioned for continued profitable growth in the ongoing economic recovery and improving industry cycle,” said Dow CEO James Fitterling. “As the market recovery broadens, we anticipate increasing margins as differentiated parts of our portfolio see improving demand."

Dow expects capital expenditures of USD1.6 billion in 2021, up about USD350 million. Dow also announced that it would accelerate digital investment programs, spending roughly USD400 million in 2021 and 2022. The company expects digital investment to provide more than USD300 million/year in EBITDA benefit by 2025.

As MRC wrote before, Dow will spend approximately USD294 to install and operate air pollution control and monitoring technology at 4 US chemical facilities as part of a settlement with The Department of Justice (DOJ), the US Environmental Protection Agency (EPA), and the Louisiana Department of Environmental Quality (LDEQ), according to a statement by the DOJ.

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.

The Dow Chemical Company is an American multinational chemical corporation. Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber.

Cenovus closes transaction to combine with Husky

MOSCOW (MRC) -- Cenovus Energy Inc. is pleased to announce that its strategic combination with Husky Energy Inc. has closed, according to Hydrocarbonprocessing.

With the close of the transaction, Husky has become a wholly owned subsidiary of Cenovus and will remain as such until completion of a planned amalgamation among the two entities. Upon amalgamation, Cenovus will become the obligor under Husky’s existing long-term notes and other direct obligations. The combined company will continue to be headquartered in Calgary.

“This is an exciting day for Cenovus as we become a leaner, stronger, more fully integrated oil and natural gas company that is exceptionally well-positioned to weather the current environment and be an energy leader in the years ahead,” said Alex Pourbaix, Cenovus President & Chief Executive Officer. “With the closing of this transaction, we will focus on safely and efficiently integrating the assets and teams of these two great companies while working to realize the USD1.2 billion in synergies we’ve identified. These cost and capital efficiencies, combined with our strong portfolio of well-matched upstream production, midstream and downstream assets as well as improved financial strength, are expected to generate strong value for our shareholders.”

The combination creates Canada’s third largest crude oil and natural gas producer, based on total company production, with about 750,000 barrels of oil equivalent per day of low-cost oil and natural gas production. Cenovus is also now the second largest Canadian-based refiner and upgrader, with total North American upgrading and refining capacity of approximately 660,000 barrels per day bpd. In addition, the company has access to about 265,000 bpd of current takeaway capacity from Alberta on existing major pipelines, 305,000 bpd of committed capacity on planned pipelines and 16 million barrels of crude oil storage capacity as well as strategic crude-by-rail assets that provide takeaway optionality.

The commitments both Cenovus and Husky have made to world-class safety performance and ESG leadership will remain core to the combined company. This includes an ongoing commitment to transparent performance reporting, an ambition to achieve net zero emissions by 2050 and a plan to set ambitious new ESG targets for the combined company later this year.

“I want to thank and congratulate everyone at Cenovus and Husky for their dedication and hard work in bringing this transaction to a successful conclusion,” Pourbaix said. “This is truly one of the most significant developments in the history of our two companies, and in the history of the Canadian energy industry, for that matter.”

Cenovus expects to provide additional details on its future plans with the release of its 2021 capital budget and updated corporate guidance in late January. Fourth quarter and year-end financial and operating results for both Cenovus and Husky Energy are scheduled for release in mid-February.

As MRC reported earlier, Canadian oil and gas producer Husky Energy resumed production at its catalytic reformeri n Lima, Ohio, USA, on 15 September, 2020, after an unplanned shutdown. The company shut its production with a capacity of 115,000 mt/year of benzene and 330,000 mt/year of of toluene on 14 September, 2020.

Benzene is a feedstock for the production of styrene monomer (SM), which, in its turn, is a feedstock for manufacturing polystyrene (PS).

According to MRC's ScanPlast report, Russia's estimated consumption of PS and styrene plastics totalled 520,630 tonnes in 2020, which corresponded to the same figure a year earlier. December estimated consumption of PS and styrene plastics in the country grew by 5% year on year to 47,490 tonnes.