PKN Orlen petchem merger plans credit positive outlook - Fitch

MOSCOW (MRC) -- PKN Orlen’s strategic focus on petrochemicals on the planned merger with fellow Polish state-controlled groups Grupa Lotos and PGNiG could be positive for the credit outlook of resulting merged entity, said agency Fitch.

PKN Orlen’s credit profile will benefit from larger scale, stronger business diversification and expansion into the more stable utility sector if its merger with the second-largest refiner in Poland, LOTOS, and integrated Polish utility, PGNiG, is completed. The financial profile of the combined group and its strategic direction will be key to resolving the RWP. Fitch expects to resolve the RWP once the transactions, especially the merger with PGNiG, are closed, which is expected in 4Q21, but the process, including regulatory approvals, may be completed subsequent to six months in the future.

PGNiG is a Polish majority state-owned integrated utility with dominant domestic position in oil and gas exploration and production (E&P), gas imports, gas distribution and gas supply. Its 2019 EBITDA comprised 62% upstream, 36% gas distribution and 16% heat and power generation. LOTOS is the second largest refiner in Poland operating a 210 thousand barrels per day (kbbl/d) refinery in Gdansk, retail network with 513 stations and upstream assets with production of 20 thousand barrels of oil equivalent per day (kboe/d).

It added that Orlen’s planned merger with Lotos, the second-largest refiner in Poland, and PGNiG, a gas, heat and power utility, would benefit from larger-scale, stronger business diversification and expansion into the more stable utility sector.

As per MRC, the European Commission agreed to the merger of the Polish concerns PKN Orlen and Lotos. For example, PKN Orlen received conditional EU antitrust consent to take over its rival Lotos and announced that it plans to buy Poland's largest oil and gas company PGNiG. The Polish state is the largest shareholder in PKN Orlen, Lotos and PGNiG. Orlen's acquisition of Lotos was announced in February 2018.

As MRC informed earlier, Polski Koncern Naftowy Orlen SA, (PKN Orlen) reduced the production of terephthalic acid (PTA) at the plant in Wloclawek (Wloclawek, Poland) due to a technical breakdown. Production problems at the enterprise supplying raw materials for PTA production led to a decrease in its output in January and most of February by 20%, and by the end of February - by about 50%.

PTA is one of the main raw materials for the production of polyethylene terephthalate (PET).

As per MRC ScanPlast, Russia's calculated consumption of polyethylene terephthalate (PET) grew to 263,660 tonnes in the first four months in 2021, up 13% compared to the same period in the previous year. 78.3% of the increase in consumption falls on the share of bottled PET chips due to the virtual absence of exports and an increase in the volume of imports.

MRC

MOSCOW (MRC) -- Chinese authorities have ordered a unit of state-run PetroChina to stop trading off crude oil import quotas with local refineries as part of a crackdown on excessive fuel production, a move that could cut the country's crude imports by 3%, reported Reuters with reference to sources.

Beijing has stepped up scrutiny of crude oil quota use and imports by state and private firms this year to ease a fuel surplus that has weighed on the sector's profits and led to excess emissions that have undermined China's climate goals, said five industry sources with knowledge of the matter.

PetroChina Fuel Oil Co Ltd is a major crude oil supplier to China's independent refineries.

Without additional quotas from the company, crude purchases by the independent refineries, also known as teapots, will fall by 12 million to 16 million tonnes annually (240,000 to 320,000 barrels per day), or roughly 3% of China's total crude imports, the sources said, forcing the firms to import fuel oil instead to keep plants running.

The drop in crude imports by the world's largest oil importer could also cap a recovery in global oil prices, which are now hovering above USD70 a barrel.

China has in recent months unleashed an array of measures aimed at curtailing its bloated oil refining sector, from examining illicit trading of import quotas to levying new taxes to curb unwanted fuel supplies.

PetroChina Fuel Oil, which produces and trades fuel oil and bitumen, was ordered in April to stop re-selling imported crude oil and trading off quotas to about half a dozen teapots, a legacy practice the firm has engaged in for years.

"The government is taking a lot more seriously carbon emissions this year, and sees large crude oil imports and large refined fuel exports as something unsustainable," said one official.

Teapots that are processing more crude beyond their quota allowances are expected to be reined in, said the official.

China, the world's second-largest refiner, has since late 2015 allowed over 40 smaller plants to process imported oil to support private investment, but controls overall oil purchases using a quota system to curb wasteful refinery expansions.

Under a legacy scheme endorsed by parent company PetroChina , the fuel oil unit partnered with teapot refineries under a so-called "processing" arrangement, under which the firm pays a processing fee to the teapots and buys back refined products such as diesel at an agreed price, said a second official. But sources said it was "very tough" to agree on the buy-back terms on prices or fuel quality, so PetroChina Fuel Oil often simply let these plants use its import allowances or sometimes directly resold imported crude oil to them.

"(The investigation) officially ends the years-long partnership between the company and teapots," said a third official.

After being cut off from the crude supply business, PetroChina Fuel Oil will be forced to resume importing fuel oil to supply its four bitumen plants and also expand into other businesses to boost revenue.

As MRC informed earlier, PetroChina, Asia's largest oil and gas producer, has reported its biggest quarterly profit in seven years, citing rising oil and gas prices and a recovery in Chinese fuel demand from last year's deep coronavirus slump. The company swung to a 27.7 billion yuan (USD4.28 billion) first-quarter net profit, having posted a loss in the same period last year, and announced that it is setting up a new investment vehicle with a focus on strategic assets and low-carbon projects.

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 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.

PetroChina Company Limited, is a Chinese oil and gas company and is the listed arm of state-owned China National Petroleum Corporation, headquartered in Dongcheng District, Beijing. It is China's biggest oil producer.
MRC

MOSCOW (MRC) -- The hydrocracker at Royal Dutch Shell Plc's 227,400 barrel-per-day (bpd) Norco, Louisiana, refinery was partially shut because of a malfunction, reported Reuters with reference to sources familiar with plant operations.

The second stage of the 40,000-bpd hydrocracker was taken offline, the sources said.

Hydrocrackers break down feedstocks, usually, gas oil to make diesel and other motor fuels. The unit's first stage continues to operate.

As MRC informed previously, in late May, 2021, Shell agreed to sell its controlling interest in a Texas refinery to partner Petroleos Mexicanos (Pemex) for about USD596 million. And in early May, Shell announced the sale of its 149,000 barrel per day (bpd) refinery in Washington to Hollyfrontier Corp.

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 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.

Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
MRC

MOSCOW (MRC) -- RPM International Inc, a specialty coatings and sealants manufacturer headquartered in Medina, Ohio, acquired Dudick Inc, said the company.

RPM International Inc.announced that its Carboline subsidiary has acquired the Dudick Inc. business. A provider of high-performance coatings, flooring systems and tank linings, Dudick is headquartered in Streetsboro, Ohio, and has annual net sales of approximately USD10 million. Terms of the transaction were not disclosed.

"Dudick will be a natural fit in our Performance Coatings Group, bringing with them a strong reputation for high-quality products and excellent service built under the leadership of Tom Dudick,” stated Frank C. Sullivan, RPM chairman and CEO. “This acquisition of the Dudick business will allow Carboline to strengthen its position in the secondary containment linings market with an established and trusted product while simultaneously opening the door to expanded sales and future growth opportunity worldwide."

As per MRC, RPM International Inc. announced that it acquired Prime Resins to be part of its USL Group. Prime Resins is a manufacturer of specialty chemicals and equipment for infrastructure construction and repair. Headquartered in Conyers, Georgia, Prime Resins has annual net sales of approximately USD7 million. Terms of the transaction, which is expected to be accretive to earnings within one year, were not disclosed.

As MRC informed before, Russia's output of chemical products rose in March 2021 by 5.4% year on year. Thus, production of basic chemicals increased year on year by 6.7% in the first moths months of 2021. March production of polymers in primary form was 958,000 tonnes versus 861,000 tonnes in February. Overall output of polymers in primary form totalled 2,740,000 tonnes over the stated period, up by 8.5% year on year.

Founded in 1970, Dudick is a manufacturer of high-performance linings and secondary containment coatings, providing solutions for corrosion resistance and chemical containment systems across a broad range of applications including food processing, steel production, chemical processing, pulp and paper, electronics, power and biological research labs. The company’s products are manufactured in the U.S., with additional manufacturing relationships in Taiwan and South Korea, and are distributed worldwide. The Dudick business will become part of RPM’s Carboline subsidiary, which is a leading U.S. manufacturer of high-performance industrial coatings, linings and fireproofing products.

RPM International Inc. owns subsidiaries that are world leaders in specialty coatings, sealants, building materials and related services. The company operates across four reportable segments: consumer, construction products, performance coatings and specialty products.
MRC

MOSCOW (MRC) -- Greiner Packaging is for the first time incorporating renewable resources in the production of food cups made of polypropylene (PP) with in-mold labeling (IML) as the decoration technology, said the company.

Initial prototypes of the cups are available now. The new premium polyolefins designed for circularity by Borealis offer a host of advantages: manufactured using second-generation feedstocks not based on fossil fuels, same performance as virgin materials; drop-in solution, approved for food contact, ISCC PLUS certification, based on the mass balance approach, carbon footprint reduced by up to 120%.

Greiner Packaging is pursuing various approaches to make its packaging solutions as sustainable as possible. One course of action is to use so-called circular materials – that is, renewable, non-fossil fuel feedstocks. For the first time, the packaging manufacturer has now produced a food cup made of premium polyolefins obtained exclusively from waste and residue streams. The Bornewables line of products is manufactured by Borealis, a leading supplier of polyolefins based in Vienna, Austria.

Unlike renewable raw materials produced with agricultural crops grown for food and livestock feed, the Bornewables products are made from second-generation (i.e., renewably sourced) feedstocks derived solely from waste and residue streams: from vegetable oil production as well as oil waste and residues, from the timber industry, or from the food industry – for instance, used cooking oil.

The Bornewables offer the same characteristics as virgin polyolefin materials while boasting a substantially reduced carbon footprint. “The Bornewables portfolio represents a key step in our efforts to offer products decoupled from traditional feedstock, with the aim of providing a solution to the CO2 challenge. Through this product range, we are helping our customers and the value chain achieve their own sustainability targets, maintain their existing quality standards, and provide packaging solutions that are approved for food contact. We focus on the needs of our customers and the value chain as we work to drive the transition to a circular economy for plastics,” says Trevor Davis, Head of Marketing, Consumer Products at Borealis.

As per MRC, plastic packaging manufacturer Greiner Packaging partnered with Russian plastic packaging manufacturer Plastic System to create a joint venture called Greiner Packaging System. This enterprise, located in the city of Noginsk, Moscow Region, will focus on the production of containers by injection molding (IML) and printed products, as well as large-sized packaging for consumers of the food and non-food industries in the Russian Federation.

According to MRC's ScanPlast report, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.

Greiner Packaging is one of the leading manufacturers of food and non-food plastic packaging in Europe. It has operating enterprises in 19 countries of the world. The company includes the Packaging divisions of the K and Kavo groups as well as the Assistec division.
MRC