US polymer-grade propylene prices reach record high on tight supply

MOSCOW (MRC) -- US polymer-grade propylene (PGP) prices have reached a record high as strained supply continues to meet heightened demand, said Chemweek.

PGP prices have increased rapidly since the start of February as Enterprise Products took its propane dehydrogenation (PDH) unit in Mont Belvieu, Texas, down for a planned turnaround. Over the first two weeks of this month, PGP increased from its open of 73.375 cts/lb on 1 February to 98 cts/lb by 9 February. As of Tuesday morning, markets were relatively quiet as the impact of Winter Storm Uri was being assessed.

"The US propylene spot market has surged to all-time highs on the back of low inventories, reduced supply and surging downstream demand," says Carlo Barrasa, research and analysis director for North America light olefins at IHS Markit, the parent company of OPIS. "The other factor at play is the lack of derivative imports into the US as container shipping is much more expensive relative to historical patterns, in addition to shipping delays."

PGP prices may have reached a ceiling at 98 cts/lb, the price at which 43 million lbs was traded 9-10 February, before the market fell quiet. Demand destruction was seen in downstream markets as the high feedstock prices resulted in unprofitable production. Market participants began to wonder when PGP prices would fall off, but offers this month held steady at 98 cts/lb through 12 February.

According to OPIS PetroChem Wire (PCW) data, the last time PGP was valued near this level was in 2011, when the previous all-time high price for PGP was seen at 93.5 cts/lb., from 27 April to 12 May. "This is a significant price rise, but importers of US-sourced monomers have reduced their exposure, cracker operators are switching to heavier feeds, and refiners are pulling more propylene out of gasoline production to respond to the market," Barrasa adds. “When Enterprise resumes operations in April --combined with the initial arrivals of derivative imports--we believe the prices correct rather rapidly."

Prices for refinery grade propylene (RGP), the dominant feedstock in the US Gulf Coast that is upgraded to make PGP, have also been rising. Varying demand for delivery mode has created a large disparity between pipeline and railcar prices. Prompt RGP prices delivered by pipeline in Enterprise's system at Mont Belvieu rose from 36 cts/lb at the start of January to 39.875 cts/lb in early February. While not much of an increase, the hotter commodity is RGP delivered by railcar, where prices spiked from just above 40 cts/lb a few weeks ago to 66 cts/lb in the first week of February. Typically, premiums on rail material are within 5 cts/lb of the pipeline price; they are currently more than 20 cts.

RGP is a by-product of vacuum gasoil inputted to fluid catalytic crackers (FCC), a major producer of gasoline at a typical US Gulf Coast refinery. According to monthly data released last week by the US Energy Information Administration (EIA), FCC inputs have been radically reduced.

Estimated refinery operable utilization rates in the Gulf Coast (PADD 3) were 84.3%, according to EIA data for the week ending 15 January. This is compared to 90.2% last year and 92.9% in 2019, reflecting refinery reductions that continue to linger following the decrease in fuel demand caused by COVID-19.

The decrease in RGP supply off US Gulf Coast refineries continues to further an already tight RGP railcar market. In response, bids have consistently been seen in the market for chemical-grade propylene (CGP) railcars -- a costly substitute for scarce RGP. CGP pipeline bids emerged at the beginning of February. Shell permanently shut down its Convent, Louisiana, refinery at the end of 2020. The refinery's capacity included a 92,300-b/d FCC unit that supplied RGP to the Gulf Coast pipeline network.

With a decrease in refinery rates from plant shutdowns comes a decrease in RGP supply headed for propylene splitters, therefore reducing available PGP supply. On-purpose PGP production has been impacted since the start of December due to operational issues at the Enterprise Products PDH unit at Mont Belvieu.

Downstream, tight PGP monomer supply has played a role in limiting polypropylene (PP) operating rates. North American PP capacity utilization was at 90%-91% in November and December 20202, as average producer inventory days dropped into the high 20s, according to data from the ACC Plastics Industry Producers' Statistics Group.

With demand falling and import volumes picking up, PP buyers believe a market correction is coming, but it remains to be seen how quickly prices will rewind.

As per MRC, a winter storm has brought unusually cold temperatures, snow, and freezing rain to Texas and western Louisiana, forcing a large share of US light olefins production offline. As of the evening of Tuesday, 16 February, IHS Markit had confirmed the shutdown of at least 61% of US ethylene capacity, 59% of US chemical- and polymer-grade propylene (CGP, PGP) capacity, and 22% of US fluid catalytic cracking (FCC) capacity. Many plants that remained online were running at reduced capacity.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 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.
MRC

MOSCOW (MRC) -- Versalis, the chemicals subsidiary of Eni (Rome, Italy), has reported an adjusted operating loss of EUR45 million (USD54.5 million) for the fourth quarter, narrowing from a loss of EUR124 million a year earlier, said Chemweek.

The improvement was driven by stable sales volumes and recovering margins, “particularly in the polyethylene business,” it says. The loss also improves sequentially from EUR53 million in the third quarter of 2020. Strengthening economic recovery in Asia in the final part of the year, softening competitive pressures, and improved margins “supported the segment’s recovery in the fourth quarter, which also benefitted from higher product availability,” it says. The recovery in PE margins in the quarter was driven by higher demand and lower imports into Europe, it adds.

Petrochemical product sales volumes totaled 1.33 million metric tons in the fourth quarter, up 27% year on year (YOY), driven by higher volumes of intermediates due to better product availability, and higher demand for PE, elastomers, and styrenics, particularly in the appliance and packaging sector, Versalis says. Sales were also higher sequentially than the third-quarter total of 1.1 million metric tons. The average chemicals plant utilization rate also improved substantially, rising to 75%, up 9% both YOY and sequentially.

Margins improved mainly in the PE segment, with widening spreads versus ethylene, and also in styrenics/elastomers due to lower feedstock prices. “In the fourth quarter and in the full year, the cracker margin reported an increase as a result of the reduction of the feedstock prices and positive exchange rate effects,” it says.

For the full-year 2020, the chemicals business reported an adjusted operating loss of EUR229 million, narrowing from EUR268 million in 2019. Sales were up 1% from 2019 thanks to a positive performance in the intermediates, styrenics, and PE segments due to higher product demand, partly offset by a general reduction in elastomers volumes due to weaker demand in main end-markets, particularly the automotive sector, Versalis says.

Parent company Eni has also committed to the “full decarbonization of all our products and processes” to achieve net zero emissions by 2050, says Eni CEO Claudio Descalzi. The energy giant has upgraded its net-zero emission goals, targeting a 25% reduction by 2030 versus 2018 levels, and a 65% reduction by 2040.

Other targets include doubling existing biorefining capacity to around 2 million metric tons/year by 2024, then further expanding that capacity by a multiple of five by 2050. It will also increase its use of biogas, waste, and recycling final products. Eni says that its biorefineries will also be palm-oil free by 2023, “with a growing input of feedstock coming from waste and residues that will account for approximately 80% of the total in 2024 versus 20% today."

As per MRC, Versalis S.p.A. (San Donato Milanese), the chemical company of Italian energy major Eni, has licensed to Enter Engineering Pte. Ltd. a Low-Density Polyethylene/Ethyl Vinyl Acetate (LDPE/EVA) swing unit to be built as part of a new Gas-to-Chemical Complex based on MTO-Methanol to Olefins technology to be located in the Karakul area in the Bukhara region of the Republic of Uzbekistan.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).

Eni is an Italian multinational oil and gas company headquartered in Rome. It has operations in in 79 countries, and is currently Italy's largest industrial company. The Italian government owns a 30.3% golden share in the company, 3.93% held through the state Treasury and 26.37% held through the Cassa depositi e prestiti. Another 39.40% of the shares are held by BNP Paribas.
MRC

MOSCOW (MRC) -- Tecnicas Reunidas S.A. (TR; Madrid, Spain) and SASA Polyester have entered into a contract for the execution of a new petrochemical project for the production of PTA (Purified Terephtalic Acid) in Adana, Turkey, said Chemweek.

The new plant will have a capacity to produce 1.5 million metric tons per year (m.t./yr). The project was announced at the end of 2020.

Total project investment was estimated by the client at USD935 million. This amount includes the value of the contract of Tecnicas Reunidas. The scope of the contract includes engineering, procurement and construction supervision and management (EPCM). The contract has already been launched and will be executed under a fast track scheme.

The project has a high compromise regarding environmental and social compliance, compiled in the ESIA Report (Environmental and Social Impact Assessment) approved in November 2020, that Tecnicas Reunidas will observe during the project development. Juan Llado, Chairman of Tecnicas Reunidas commented: “Tecnicas Reunidas is uniquely placed to leverage on its engineering and technical expertise and its solid petrochemical track record to play a significant role in the growth of this industry in Turkey. We look forward to delivering this project safely and sustainably and we are extremely honored to participate in this significant development for Turkey, a country where our company is fully committed. We also look forward to participating in the economic development of the Adana province, boosting the local supply chain, optimizing distribution and therefore achieving a significant reduction in the carbon footprint."

As per MRC, INVISTA Technology and Licensing Group, INVISTA Performance Technologies (IPT), and SASA Polyester Sanayi A. S. (SASA) reached an agreement on August 25 to license IPT's P8 technology for SASA's TPA plant project in Adana, Turkey. With an annual output of 1.5 million tonnes of TPA, this will be the largest single-line unit used under the INVISTA license.

PTA is used to produce polyethylene terephthalate (PET), which, in its turn, is used in the manufacturing of plastic bottles, films, packaging containers, in the textile and food industries.

According to MRC's ScanPlast report, Russia's estimate PET consumption reached 61,110 tonnes in November 2020, up by 1% year on year. Overall PET consumption in Russia reached 648,110 tonnes in the first eleven months of 2020, down by 18% year on year.
MRC

MOSCOW (MRC) -- Stepan Co. (Northfield, Ill.) has closed on the acquisition of a fermentation plant located in Lake Providence, Louisiana. Financial terms of the transaction were not disclosed, said Chemweek.

"Fermentation is a new platform technology for Stepan Company as we look to commercialize next generation surfactants. Bio-surfactants, produced via fermentation, are attractive due to their favorable biodegradability, low toxicity, and in some cases, unique antimicrobial properties,” said F. Quinn Stepan Jr., Chairman and Chief Executive Officer of Stepan Company.

Bio-surfactants can be an attractive formulation option for customers in the agriculture, oilfield, personal care and household, industrial and institutional cleaning markets. In March 2020, Stepan closed on the acquisition of NATSURFACT, a rhamnolipid-based line of bio-surfactants derived from renewable sources. NATSURFACT’s rhamnolipid technology provides an important new option as customers across markets seek new sustainability targets for their products.

"The acquisition of an industrial scale fermentation plant represents the latest step in our bio-surfactant commercialization efforts. With additional investment, we expect to be able to produce 20,000 metric tons per year of bio-surfactants from the site. We look forward to working with our customers to bring these next generation surfactants to the market," Stepan said.

As MRC informed before, Stepan conducted planned maintenance at its 90,000 tonnes/year phthalic anhydride (PA) plant Millsdale, Illinois, US, from early October to end-October, 2020.

Phthalic anhydride is widely used in for the production of paints and varnishes and plasticizers for PVC products. In a small amount it is used in the manufacture of rubber products, tires. In addition, it is used in the light, pharmaceutical and electrical industries.

We remind that 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 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.
MRC

MOSCOW (MRC) -- Texas energy companies began preparing to resume oil and gas production after days of frozen shutdowns as electric power and water service slowly resumed at darkened oilfields and refineries, said Reuters.

It will take several days for oilfield crews to deice valves, restart systems and begin oil and gas production. U.S. Gulf Coast refiners are assessing damage to facilities. They face five- to seven-day restarts with low water pressure continuing to hamper operations even as power is being restored, said people familiar with the matter.

No additional outages were reported overnight, said the Electric Reliability Council of Texas (ERCOT), which runs the state's electric grid. It reported sufficient power for morning demand and predicted it would be out of emergency condition later in the day. Millions of people across Texas shivered in the dark this week after a severe winter storm laid siege to the state, with demand for natural gas spiking and supplies needed to power electric generators and heat homes drying up.

Estimates vary, but the unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day of crude oil production and 21 billion cubic feet (bcf) of natural gas, according to analysts. Texas refiners halted about a fifth of the nation's oil processing amid power outages and severe cold.

Goldman Sachs analysts estimate a 700,000-bpd average decline in U.S. onshore crude production in February, excluding Alaska. Only a minority of wells could face troubles restarting, it said. U.S. Gulf Coast refineries are potentially less prepared for extremely cold weather than for seasonal storms, Goldman said, creating risks of "more prolonged refining downtime."

The freeze offs, which can occur when water in the gas turns to ice, led utilities to call for conservation measures from California to West Virginia. Ford Motor Co halted production in Kansas City, Missouri, because of a lack of natural gas. Mexico, which imports large volumes of natural gas from the United States, experienced blackouts in northern states bordering Texas, with some factories reporting billions in losses on limited natural gas supplies from Texas.

Texas on Wednesday ordered gas producers to halt exports needed by state utilities through Sunday, sparking Mexico to call the U.S. envoy to press for natural gas supplies. Pipeline gas exports from the U.S. to Mexico rose to 5.1 bcf on Friday after dropping to a 13-month low of 3.8 bcf per day on Tuesday, Refinitiv Eikon data showed.

In the United States, the move did not appear to affect deliveries to other states. California's power exchange and the MISO, an exchange that handles 15 U.S. states, both said they had not seen any impact. More natural gas will soon be flowing. Chevron Corp and ConocoPhillips have begun restoring shale output, and Chevron will prioritize natural gas production. Texas oil and gas regulators and a DiamondBack Energy executive also reported that power was being restored to west Texas, where oil production was shut by record snowfall and power outages.

"The majority of our Permian and Eagle Ford volumes remain offline," said Conoco spokeswoman April Andrews, referring to the two major Texas shale fields. Conoco, the top U.S. independent oil producer, is ready to bring back full operations across its U.S. operations outside of Alaska once power and other infrastructure outages end, she said.

As per MRC, a winter storm has brought unusually cold temperatures, snow, and freezing rain to Texas and western Louisiana, forcing a large share of US light olefins production offline. As of the evening of Tuesday, 16 February, IHS Markit had confirmed the shutdown of at least 61% of US ethylene capacity, 59% of US chemical- and polymer-grade propylene (CGP, PGP) capacity, and 22% of US fluid catalytic cracking (FCC) capacity. Many plants that remained online were running at reduced capacity.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 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.
MRC