MOSCOW (MRC) -- Commodities trader Gunvor Group posted a record USD1.66 billion gross profit for 2020 even though revenue fell by a third as its trading desks profited from the unprecedented volatility in the oil market triggered by the coronavirus pandemic, said Hydrocarbonprocessing.
While revenue fell to USD50 billion from USD75 billion in 2019 the oil demand crash in the second quarter of 2020 created profitable trading opportunities and desks continued to generate healthy margins in the second half, Gunvor said on Wednesday.
"It's been a good year for the group and we continue to be on a good path in the first quarter focusing on the energy transition," Chief Financial Officer Muriel Schwab said in a phone interview. "Thanks to strong earnings and cash flows, we have been able to strengthen our balance sheet in two ways. The first was taking a very conservative valuation of our refining assets ... and second, building up our equity levels," Schwab told Reuters.
However, Gunvor's net profit fell to USD320 million from a revised USD435 million in 2019 after it booked charges worth USD340 million related to the mothballing of its Antwerp refinery and the closure of two crude distillation units in Rotterdam.
The 2019 profit was revised up from USD381 million after it was published last year, Gunvor's spokesman said. With the refinery closure, Gunvor's oil refining capacity has shrunk to about 100,000 barrels per day at its plant in Ingolstadt, Germany. The company said refining margins were negative throughout 2020. Schwab said Gunvor's tank farm at the Antwerp site would continue working as a terminal.
She said Gunvor's trading strength was broad-based with its core profit drivers, such as natural gas and liquefied natural gas (LNG), generating earnings independently of the market structure. This year, renewables and investments relating to the energy transition will be the focus for Gunvor, including its new renewables venture Nyera.
Total traded volumes were slightly lower than 2019 at 191 million tonnes, or about 2.7 million barrels of oil equivalent a day, the company said. The share of transitional fuels, which include natural gas, LNG and biofuels, has risen to just under 50% of total volumes from 28% in 2018.
Schwab also said the company had not made provisions for any potential fines in relation to its operations in Ecuador. Gunvor's dealings in the country are being scrutinised by local authorities and as part of a bribery investigation by the U.S. Department of Justice (DOJ). A former Gunvor employee pleaded guilty to bribing Ecuadorian officials in relation to oil deals last month as part of a wider conspiracy the DOJ said included other Gunvor employees.
As MRC informed earlier, 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 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 the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 576,270 tonnes in the first three month of 2021, up by 4% year on year. Low density polyethylene (LDPE) and high density polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market totalled 410,890 tonnes in January-March 2021, up by 56% year on year. Supply of homopolymer PP and PP block copolymers increased.