COVID-19 - News digest as of 02.03.2021

1. Indorama reports lower profit despite higher volume

MOSCOW (MRC) -- Thailand-listed Indorama Ventures Ltd (Ltd) expects demand recovery for its products to continue this year after it swung to a net profit of Thai baht (Bt) 1.61bn ($54m) in the fourth quarter of 2020, said Chemweek. Fourth-quarter earnings were driven by stronger production volumes and contributions from its polyethylene terephthalate (PET) business. IVL's overall production rose by 21% year on year to 3.48m tonnes in the fourth quarter. Core EBITDA at its combined PET business rose by 31% year on year to USD177m in October-December 2020. In 2021, the uptrend in crude oil prices is expected to positively impact its PET premiums this year and result in positive inventory valuation gains, IVL said in a statement. "We see robust demand for PET and tightness in the market, which will be positive for spreads across our value chain of paraxylene (PX), purified terephthalic acid (PTA) and monoethylene glycol (MEG)," the company said.


Crude oil futures fall on stronger dollar, OPEC+ uncertainty

MOSCOW (MRC) -- Crude oil futures dived during mid-morning trade in Asia March 2, as a stronger US dollar eroded buying sentiment, and as uncertainty over the upcoming OPEC+ meeting continued to weigh on the market, reported S&P Global.

At 11:05 am Singapore time (0305 GMT), the ICE Brent May contract was down 96 cents (1.5%) from the March 1 settle to USD62.73/b, while the April NYMEX light sweet crude contract fell $1.07/b (1.76%) to USD59.57/b.

The fall in crude prices was precipitated by a stronger US dollar, which makes purchasing oil more expensive for buyers using other currencies. At 10:54 am, the March US Dollar Index futures on ICE was trading at 91.235, up 0.388% from the March 1 settle of 91.036.

Contributing to the downturn was jitters ahead of the March 4 OPEC+ meeting, which is expected to offer guidance into the coalition's production plan going forward.

"Crude oil fell as traders look ahead nervously to the OPEC meeting later this week," ANZ analysts said in a March. 2 note.

The coalition has currently taken out 7.2 million b/d of crude production - roughly 7% of pre-pandemic supply - and can increase supply by up to 500,000 b/d each month, as per the agreement struck on Dec. 3, 2020.

The March 4 meeting, however, could potentially see oil production rising by up to 1.5 million b/d, as Saudi Arabia is also expected to announce whether it will extend its voluntary additional 1 million b/d cut, scheduled to end after March.

Analysts believe that given rising global oil demand, the market can likely absorb a 1.5 million b/d increase in oil production. However, these analysts have also cautioned that such a large increase in supply could spook the market, and lead to a downward price correction.

The meeting may see some contention among coalition members, some of whom such as Saudi Arabia, remain conservative, with others, such as Russia, are keen to increase supply given oil's impressive rally.

"Brent crude has rallied nearly 30% this year as stimulus measures and the vaccine rollout raised hopes of stronger demand...this could see alliance members once again turn to the kingdom to provide the bulk of support to the market, even if others call for higher quotas," ANZ analysts said.

In inventory data, commercial crude stocks in the US are expected to have increased 1.3 million barrels to around 464.3 million barrels in the week ended Feb. 26, analysts surveyed by S&P Global Platts said. The build would put inventories 0.4% behind the five-year average of US Energy Information Administration data, opening the first deficit to the average since late March 2020.

The weekly inventory reports from the American Petroleum Institute and the EIA, are due to be released later March 2 and March 3, respectively.

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 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.

Lanxess to acquire French biocide manufacturer

MOSCOW (MRC) -- Lanxess says it has acquired Intace SAS (Paris, France), a biocide manufacturer that makes specialty fungicides for the packaging industry, according to Chemweek.

The companies signed an agreement yesterday and the transaction is expected to be completed in the first quarter of 2021, Lanxess says. Financial terms have not been disclosed.

“With the acquisition of Intace, we are strengthening our biocide technology platform for packaging and labels in the consumer goods industry. We are also following a trend: plastics are more and more being replaced by paper in packaging,” says Nicolas Gallacier, head/marketing industrial reservation & coatings at Lanxess material protection products.

Intace’s products are used in paper, paperboard, soap packaging, labels, and bank notes, with the company generating sales in the mid-single-digit million euro range in 2020, Lanxess says.

As MRC informed before, in January, 2021, Lanxess completed the sale of its membrane business to French resource management firm SUEZ. The deal was previously announced in July, 2020, as Lanxess realigned its water treatment technologies segment, resulting in the sale of its reverse osmosis membrane business.

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.

Lanxess is a leading specialty chemicals company with about 19,200 employees in 25 countries. The company is currently represented at 74 production sites worldwide. The core business of Lanxess is the development, manufacturing and marketing of chemical intermediates, additives, specialty chemicals and plastics. Through Arlanxeo, the joint venture with Saudi Aramco, Lanxess is also a leading supplier of synthetic rubber.

Delek releases statement regarding weekend refinery fire in El Dorado

MOSCOW (MRC) -- Delek US has issued a statement regarding the fire over the weekend at their El Dorado refinery, reported local media outlet Myarklamiss.

According to Delek US, the fire at the Penex unit occurred on Saturday, February 27. An on-site emergency response team along with the El Dorado Fire Department were able to extinguish the fire.

The air quality was monitored following the fire and Delek US says they have not detected any adverse impacts.

Six employees were receiving medical treatment on Saturday evening in relation to the fire.

Delek US also says a full investigation will be launched to determine what caused the fire.

As MRC informed earlier, a liquid catalytic cracking unit at Delek's refinery in Tyler, Texas, USA, suffered a technological failure on April 13, 2019. The technological glitch at this unit with a capacity of 40,000 mt/year of propylene occurred due to a thunderstorm, which led to a power outage.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, 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.

PP prices risen in Russia by 17% and higher since early 2021

MOSCOW (MRC) -- A shortage of polypropylene (PP) intensified in the global markets in February, prices have reached record levels for the past few years. A similar situation was also registered in the Russian market, PP prices reached record highs, according to ICIS-MRC Price report.

In the previous years, PP became cheaper in the Russian market in January-February under the pressure on weak demand and oversupply. This year's situation change dramatically. High prices in foreign markets put a major pressure on prices in Russia. The rise in prices of propylene homopolymer (homopolymer PP) began in January, but the dynamics of price growth intensified in February. Prices have increased by more than 17% since the beginning of the year.

The shortage of PP in the global markets was exacerbated in the second half of February by unplanned shutdowns of several producers in the United States due to frosts. The shortage of PP in Europe pushed prices up by 15% in February, whereas in Turkey prices of homopolymer PP raffia exceeded USD1,800/tonne CFR last week.

Such a rapid rise in PP prices in a number of the world's regions since the beginning of the year also pushed the largest producers to constantly raise prices in the Russian market. Russian producers' export prices for a number of destinations have been higher than domestic ones for a long time.

Imports of cheap PP from Turkmenistan decreased, and prices grew to USD1,515/tonne FCA/FOB in the last export trades, whereas export prices averaged USD1,050/tonne FCA/FOB in early December.

Supply of PP was tight in the Russian market in February, some converters could not fully meet their needs in polymer even amid record high prices. The situation with the polymer availability is unlikely to improve in March.

Some sellers' spot offers for homopolymer PP raffia had exceeded Rb130,000/tonne CPT Moscow, including VAT, by late February, whereas prices of this PP grade did not exceed Rb104,500/tonne CPT Moscow, including VAT, back in early January.