Wanhua Chemical posts 34% profits drop in 2022

China’s Wanhua Chemical reported a 34.1% decrease in net profits in 2022, as steep increases in raw materials and energy prices significantly squeezed its margin, the company said.

The company has become the world’s biggest methylene diphenyl diisocyanate (MDI) supplier, with a combined capacity of 3.05m tonne/year as of late 2022.

It is also the world’s third largest toluene diisocyanate (TDI) supplier, with a total compacity of 650,000 tonne/year.

Cost for key raw materials rose heavily. For example, prices of benzene, coal and liquified petroleum gas surged by 14%-21% in 2022.

Its 1m tonne/year ethylene project in Yantai operated at 91% in 2022. Its polyurethane plants’ overall utilisation rate stood at 92% in 2022.

Outlooks: Progress on constructions of its Penglai complex, consisting of a 900,000 tonne/year propane dehydrogenation unit and downstream units. 2023 will be its “project year”. All project investments should follow three rules: in line with the company’s strategy and resources access capacity, having comparatively competitive advantages even in the most extreme competition scenario, with comprehensive considerations of global operating environment.

Wanhua Chemical also plans to increase the capacity of its polycarbonate (PC) plant in Yantai in Shandong province by 140,000 tons per year to 340,000 tons per year. The expansion will be carried out by reengineering the existing 200 ktpa PC production project at the site. The company is currently seeking environmental approval for the plan. The timing of the project is not disclosed.

Wanhua Chemical was founded on December 20, 1998, and is the first listed joint-stock enterprise after reorganization in Shandong Province, China. The company mainly produces diphenylmethane diisocyanate (MDI), including pure MDI and polymerized MDI used in the production of polyurethane (PU).

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China still added more crude oil to inventories in the first two months of the year, despite lower imports and higher refinery processing rates, said Hydrocarbonprocessing.

About 270,000 barrels per day (bpd) of crude was added to commercial or strategic inventories over January and February, according to calculations based on official data. This was down from the 1.19 million bpd in December and the 740,000 bpd for 2022 as a whole.

The slower flow into storage tanks does support the market's bullish view for a rebound in China's oil demand in 2023 as the world's largest crude importer stimulates and reopens its economy after growth was crimped last year by the now abandoned strict zero-COVID policy.

But the fact that China is still building inventories also sounds a note of caution as it suggests that even as they ramp up processing rates, refiners still have bulging stockpiles to draw upon should the price of imported oil rise to levels they deem too high.

While the current oil price has been knocked lower by the two bank failures in the United States and the rapid takeover of struggling Swiss lender Credit Suisse, the market expectation is that a reinvigorated China will drive global oil demand this year, leading to higher prices.

China doesn't disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, but an estimate can be made by deducting the amount of crude processed from the total of crude available from imports and domestic output.

The total volume of crude available from imports and domestic production in the first two months of the year was 14.63 million bpd, consisting of imports of 10.4 million bpd and local output of 4.23 million bpd.

The National Bureau of Statistics combines data for January and February to avoid distortions from the timing of the annual Lunar New Year holiday, which fell in late January this year.

We remind, Hengli Petrochemical has achieved on-spec purified terephthalic acid (PTA) production at its new facility located at Huizhou on 18 March. The company has a new 5m tonne/year PTA facility located at the site, split into two 2.5m tonne/year PTA units. On-spec PTA production was achieved at one of the two units.

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European diesel markets are flashing warnings of tightening supply while crude oil markets are weakening after nearly two weeks of disruptions at French refineries due to strike action, traders said, as per Hydrocarbonprocessing.

The industrial action, part of a nationwide movement against planned pension system changes, has led to reduced output at the Normandy and Feyzin refineries while shipments from the Donges and La Mede refineries have also been blocked.

The outages have in recent days led to growing concern that French and regional supplies of fuels, in particular diesel, could tighten in the coming weeks. In a sign of these concerns, the spread between the prompt and second month ICE low-sulfur diesel contracts rose on Monday to a premium, known as a backwardation, of USD35.25 a barrel, its highest since November 2022.

The profit margin for refining crude oil into diesel has jumped by nearly 40% over the past month. That followed weeks of rising inventories in northwest Europe as traders rushed to fill storage tanks in the run-up to a Feb. 5 EU ban on Russian fuel imports.

"The diesel market flipped from feeling long and heavy to short and very backward," one trader said. France's diesel and gasoil imports have dropped to 173,000 barrels per day (bpd) so far this month, down 50% from February and from March 2022, preliminary data from analytics group Kpler show.

In the absence of Russian diesel supplies, Europe has sharply increased imports from Asia, the Middle East and the United States in recent months. Diesel supply in the region is expected to tighten significantly by April, three trading sources said.

We remind, China still added more crude oil to inventories in the first two months of the year, despite lower imports and higher refinery processing rates. About 270,000 barrels per day (bpd) of crude was added to commercial or strategic inventories over January and February, according to calculations based on official data. This was down from the 1.19 million bpd in December and the 740,000 bpd for 2022 as a whole.

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Hengli Petrochemical has achieved on-spec purified terephthalic acid (PTA) production at its new facility located at Huizhou on 18 March, said the company.

The company has a new 5m tonne/year PTA facility located at the site, split into two 2.5m tonne/year PTA units. On-spec PTA production was achieved at one of the two units.

The start up of the new PTA unit will likely relief the current supply tightness in the domestic Chinese markets, which had supported the recent uptrend in prices.

The start up of the new PTA unit will result in additional demand for feedstock paraxylene (PX), and this will keep the PX market supported, with supply already being tight.

We remind, Hengli Petrochemical restarted No1 PTA unit in Dalian, China on 17 March after scheduled maintenance works.

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Sempra announced that its 70%-owned subsidiary, Sempra Infrastructure Partners, LP (Sempra Infrastructure), reached a positive final investment decision (FID) for the development, construction and operation of the Port Arthur LNG Phase 1 project in Jefferson County, Texas, said Hydrocarbonprocessing.

Sempra Infrastructure closed its joint venture with an affiliate of ConocoPhillips, as well as announced an agreement to sell an indirect, non-controlling interest in the project to an infrastructure fund managed by KKR. Additionally, Sempra Infrastructure announced the closing of the project's $6.8 B non-recourse debt financing and the issuance of the final notice to proceed under the project's engineering, procurement and construction agreement.

"At Sempra, we believe bold, forward-looking partnerships will be central to solving the world's energy security and decarbonization challenges," said Jeffrey W. Martin, chairman and chief executive officer of Sempra. "With strong customers, top-tier equity sponsors in ConocoPhillips and KKR and a world class contractor in Bechtel, this project has the potential to become one of America's most significant energy infrastructure investments over time, while creating jobs and spurring continued economic growth across Texas and the Gulf Coast region."

"Sempra's selection of Port Arthur as the location for a new natural gas liquefication and export terminal is a strategic decision that will cement Texas' position as the energy capital of the world," said Texas Gov. Greg Abbott. "With a highly skilled workforce and business-friendly climate, and as a national leader in LNG exports, Texas is the prime location to expand LNG operations to unleash the United States' full economic potential in such a critical industry. Expanding LNG is imperative to American energy security, and the State of Texas looks forward to working alongside Sempra to advance this mission and bring more jobs and greater opportunities to hardworking Texans."

The Port Arthur LNG Phase 1 project is fully permitted and is designed to include two natural gas liquefaction trains, two liquefied natural gas (LNG) storage tanks and associated facilities with a nameplate capacity of approximately 13 MMtpy. Total capital expenditures for the Port Arthur Phase 1 project are estimated at USD13 B.

The long-term contractable capacity of approximately 10.5 Mtpa is fully subscribed under binding long-term agreements with strong counterparties —ConocoPhillips, RWE Supply and Trading, PKN ORLEN S.A., INEOS and ENGIE S.A., all of which became effective upon reaching FID. Sempra Infrastructure is also actively marketing and developing the competitively positioned Port Arthur LNG Phase 2 project, which is expected to have similar offtake capacity to Phase 1.

We remind, Chevron Phillips Chemical (CPChem) and Charter Next Generation (CNG)––bringing the fund’s total capital to USD45 M in an effort to support the development of plastics recycling and recovery infrastructure in North America.

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