PKN Orlen takes lower supply in Rosneft oil import deal

MOSCOW (MRC) -- PKN Orlen (Plock, Poland), the country’s largest petrochemicals producer, will receive 3.6 million tons of crude oil per year from Russia’s Rosneft under a new two-year supply contract signed, reported Reuters with reference to the company's statement.

Rosneft suspended oil deliveries to Poland in February after failing to agree on new contract terms with PKN Orlen when the previous agreement expired on January 31. The previous deal had envisaged deliveries of 5.4 million to 6.6 million tons a year.

Polish refineries, including PKN’s plant in Plock, central Poland, have been importing most of their crude from Russia via pipelines but have taken steps to reduce their reliance on Russian crude.

This month, PKN Orlen signed a deal on shipments from US oil major Exxon Mobil and has also been purchasing from Saudi Arabia, Angola, Nigeria and Norway.

“The reduction of crude oil supplies under the agreement with Rosneft does not change anything from the point of view of the stability of supplies to the Orlen group’s refineries and fuels in the region,” PKN Orlen’s Chief Executive Daniel Obajtek said in a statement.

In February sources said that PKN and Rosneft had agreed oil supply terms from March 2021 after a row over prices prompted the suspension in supplies.

As MRC informed earlier, the only Czech refinery and major petrochemical producer Unipetrol was renamed Orlen Unipetrol from 1 January, 2021. Unipetrol is 100% owned by the Orlen Group.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.

PKN Orlen is a leading player on the fuels and energy markets, and the largest company in Central and Eastern Europe, listed in prestigious global rankings such as Fortune Global 500, Platts TOP250 and Thompson Reuters TOP100. The ORLEN Group operates in 6 home markets – Poland, the Czech Republic, Germany, Lithuania, Slovakia and Canada.

OQ Chemicals riases global amines prices

MOSCOW (MRC) -- Oxo intermediates and derivatives producer OQ Chemicals (Monheim am Rhein, Germany) has announced a global price riise for several of its amines products on the back of higher feedstock costs and supply and demand, reported Chemweek.

The price hike is effective 1 April 2021, or as contracts allow.

The nominated prices of butylamine, dibutylamine, and tributylamine will each be increased by EUR350/metric ton (USD417/metric ton) in Europe, 20 cents per pound (cts/lb) in North America and Mexico, and US430/metric ton in the rest of the world. Isopropylamine will rise by EUR300/metric ton in Europe, by 17 cts/lb in North America and Mexico, and by USD365/metric ton elsewhere. Prices for 2-ethylhexylamine and di-2-ethylhexylamine will increase by EUR150/metric ton in Europe, 8 cts/lb in North America and Mexico, and USD180/metric ton in the rest of the world.

OQ announced price increases for several amines products in December 2020.

As MRC informed previously, earlier this week the company also increased prices for several oxo intermediate products worldwide, citing strong demand, and rising raw material costs.

We remind that in September 2020, OQ Chemicals entered into an agreement to license its advanced proprietary technology for the production of ethylene and propylene derivatives to Duqm Refinery and Petrochemicals Industries Company (DRPIC) in Oman. DRPIC, a joint venture between Oman Oil Company and Kuwait International Oil Company, is a planned grassroots petrochemical complex at Duqm, Oman. In all, DRPIC awarded twelve license packages to international licensors.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.

OQ Chemicals, formerly Oxea, is a global manufacturer of oxo intermediates and oxo derivatives, such as alcohols, polyols, carboxylic acids, specialty esters, and amines. These products are used for the production of high-quality coatings, lubricants, cosmetics and pharmaceutical products, flavours and fragrances, printing inks and plastics. OQ Chemicals is part of OQ, an integrated energy company that delivers sustainability and business excellence. OQ operates in 16 countries and covers the entire value chain from exploration and production to the marketing and distribution of its products.

Weaker demand for crude oil takes toll on tankers, US refiners

MOSCOW (MRC) -- US refiners are scaling back on hiring ships for longer periods to save on costs in another sign of uncertainty over when global oil demand will return to pre-COVID levels, reported Reuters with reference to shipping and trade sources.

The global rollout of coronavirus vaccines and the expectation that government-offered stimulus packages will boost the world economy has raised expectations of a recovery in oil consumption. But fuel demand remains sluggish, keeping oil refiners under pressure and looking for ways to limit further losses.

The International Energy Agency, for example, does not expect oil demand to catch up with supply until about the third quarter.

US bookings for tankers hired on longer-term contracts, known as time charters, have dropped in recent weeks, as this usually means paying for longer hire costs, the sources said.

"It is tough taking a time charter now as it will lose money for the next few months and is hard to justify," one shipping source said.

Earnings for three-year and five-year time charters have also dropped from last year's highs, a trend which is weighing on profits for tanker owners.

"2021 is bound to become a bad year for oil product tankers – more so, as the option to manage bits and pieces of your risk in the time charter market is slim,” said Peter Sand, chief shipping analyst with trade association BIMCO.

Sand added that there were more time charters concluded in 2020 than in the two previous years. This was partly because tankers were booked for storage as oil demand plummeted.

One US refining executive said it did not plan to go back to chartering long-term vessels in the future to cut costs.

"The last thing you need is to get stuck with several millions of dollars worth of unused vessels for the year. We have had several cases of that," the US executive said.

US refiners were also hit by the cold conditions in Texas in January, which triggered a drop in refinery throughput, leaving fewer refiners seeking vessels for shipments and temporarily cut overall refined product exports. US refined product exports have fallen in five of the last six weeks, based on EIA figures.

As MRC informed before, the largest US refinery, Motiva Enterprises’ 607,000 barrel-per-day Port Arthur, Texas, plant, returned to normal operations. The refinery was shut on Feb. 15 when freezing temperatures, rarely seen on the US Gulf Coast, knocked out steam supply. Motiva began restarting the refinery on Feb. 24.

Motiva Chemicals has also resumed operations at its mixed-feed cracker in Port Arthur, USA. The process of restart of this cracker with the capacity of 635,000 mt/year of ethylene and 340,000 mt/year of propylene began on 27 February, 2021, and finished late last week. The cracker wa shut along with the refinery at the same site on 14 February, 2021, because of the deep freeze.

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.

COVID-19 - News digest as of 17.03.2021

1. European Council endorses EU sustainable chemicals strategy

MOSCOW (MRC) -- The European Council has endorsed the EU's chemicals strategy for sustainability, adopted by the EU Commission in October 2020, reported Chemweek. The council has directed the commission to implement the actions laid down in the strategy, including targeted amendments to streamline EU chemicals legislation, substituting and minimizing substances of concern, and phasing out the most harmful chemicals for non-essential societal uses. The chemicals strategy is an essential part of the EU Green Deal and its zero-pollution ambition, as well as a key component in the EU recovery plan from the COVID-19 crisis.


Wacker swings to profit despite sales dip on lower volumes, prices

MOSCOW (MRC) -- Wacker Chemie reports net profit for 2020 of EUR202.3 million (USD241.2 million), swinging from a net loss of EUR629.6 million, despite a 4.8% decline in sales to EUR4.69 billion due to the negative impact of the COVID-19 pandemic on volumes and prices, reported Chemweek.

The loss in 2019, as noted in a financial update provided by the company in February, was mainly the result of an impairment charge of EUR760.0 million that Wacker recognized related to its polysilicon production facilities that year, it says. EBITDA declined 14.9% year on year to €666.3 million, while EBIT of EUR262.8 million compared with a loss of EUR536.3 million in 2019.

The company’s silicones business reported a 9% decline in sales, to EUR2.24 billion, due to lower prices for standard silicones, reduced volumes, and negative currency effects. EBITDA decreased 19%, to EUR387.8 million. In 2021, the company expects the business’ sales to climb by a mid-single-digit percentage, and EBITDA is projected to be slightly higher than 2020, with higher raw material prices slowing earnings, it says.

Wacker’s polymers division posted a slight, 1%, decline in sales to EUR1.30 billion, due to price declines and negative exchange-rate effects. EBITDA was 39% higher, at EUR270.5 million, with positive effects coming from improvements in the cost of goods sold and a decline in raw material prices, the company says. In 2021, Wacker expects the division’s sales to go up by a mid-single-digit percentage, and EBITDA to be markedly lower due to substantially higher raw material prices.

The biosolutions business recorded sales that were 1% higher at EUR246.1 million, due mainly to volume growth in biopharmaceuticals and cyclodextrins. EBITDA increased 23%, to EUR38.1 million because of volume growth and an improved cost structure, Wacker says. In 2021, the business’ sales are likely to grow by a low-double-digit percentage, and EBITDA is expected to be slightly higher than 2020, the company says.

Wacker’s polysilicon division saw sales increase 2%, to EUR792.2 million, due to volume growth and a better product mix. EBITDA, however, dropped 92% to EUR4.7 million. The fall in EBITDA is mainly because special income of EUR112.5 million in insurance compensation booked for the Charleston incident was included in 2019, the company says. In 2021, Wacker forecasts that the division’s sales will increase by a mid-single-digit percentage, driven by an improved product mix and slightly higher volumes. It also anticipates that average prices for polysilicon will not decrease in 2021. EBITDA is expected to be clearly positive and markedly above the 2020 figure, it says.

“Although we are suitably cautious about the coronavirus situation, we have entered 2021 with optimism,” says Rudolf Staudigl, CEO of Wacker. During the first two months of 2021, the company’s business “remained on a dynamic trajectory,” the company says. Demand is robust across all business divisions, with group sales and EBITDA both clearly higher than last year, it says.

For the first quarter of 2021, Wacker expects to post group sales of almost EUR1.3 billion, compared to EUR1.2 billion in the first quarter of 2020. EBITDA is likely to be substantially above last year’s level, benefiting mainly from strong demand for polysilicon and construction-sector products, and from generally lower production costs, the company says.

For the full year 2021, the company says that despite the ongoing risks and negative impacts associated with the pandemic it expects group sales to climb by a mid-single-digit percentage, primarily due to volume growth. EBITDA is likely to be 10-20% higher than in 2020, with savings in personnel and non-personnel costs achieved under the company’s ongoing efficiency programs expected to have a favorable effect on earnings, it says. Markedly higher raw material costs and negative currency effects will slow EBITDA by more than €100 million, it adds. Net earnings are expected to be substantially above the 2020 figure.

Non-personnel cost savings improved 2020 income by more than EUR50 million, but efficiency-related restructuring expenses of EUR48.9 million lowered earnings, Wacker says. In 2021, the company expects to see non-personnel cost savings of over EUR100 million, as well as a noticeable reduction in personnel costs. It intends to achieve annual savings of about EUR250 million from the end of 2022 through its ongoing efficiency program, reduction of non-personnel costs, and the cutting of around 1,200 jobs in Wacker’s administrative departments and in the divisions’ non-operational functions, according to Staudigl.

As MRC reported earlier, Wacker Chemie will cut 1,000 jobs by the end of 2022 to save costs and prepare for a “harsher competitive environment”. Munich-based chemical group Wacker Chemie AG has begun its “Shaping the Future” restructuring plan by announcing 1,000 jobs will be lost by the end of 2022 as it aims to save EUR250 million per year. The company announced around 800 posts will be culled at German sites with administrative staff and people working in indirect and non-operational roles those at risk.

We remind that Wacker Chemie operates a 90 ktpa ethylene-vinyl-acetate (EVA) compounding plant at the Ulsan site, consisting of two lines. The second line with a capacity of 40,000 tons of products per year was launched in 2013.

According to MRC's DataScope report, January EVA imports to Russia rose only by 0,07% year on year to 3,084 tonnes from 3,087 tonnes a year earlier, and overall imports of this grade of ethylene copolymer into the Russian Federation dropped in January-December 2020 by 3,41% year on year to 38,170 tonnes (39,520 tonnes in 2019).

Wacker Chemie AG is a worldwide operating company in the chemical business, founded 1914. The company is controlled by the Wacker-family holding more than 50 percent of the shares. The corporation is operating more than 25 production sites in Europe, Asia, and the Americas. The product range includes silicone rubbers, polymer products like ethylene vinyl acetate redispersible polymer powder, chemical materials, polysilicon and wafers for semiconductor industry.