Borouge shareholders approve USD1.3 bn dividend for 2023

Borouge shareholders approve USD1.3 bn dividend for 2023

Borouge Plc, a leading petrochemicals company that provides innovative and differentiated polyolefins solutions, confirmed shareholder approval of a USD650 mln (7.94 fils/share) final 2023 cash dividend at its Annual General Meeting (AGM), said the company.

The company also confirmed its intention to pay a total dividend of USD1.3 billion for 2024, reinforcing its commitment to shareholder value.

Dr. Sultan bin Ahmed Al Jaber, Minister of Industry and Advanced Technology and Chairman of Borouge, said, "In 2023, Borouge significantly outperformed its industry peers, demonstrating remarkable operational and financial resilience and reinforcing its position as one of the world's most profitable and innovative polyolefin producers. Borouge is pursuing accelerated growth domestically and internationally.

"Locally, Borouge 4, a major strategic growth project, is expected to add approximately USD1.5 - USD1.9 billion to revenue annually after recontribution and full production ramp-up of the plant. Borouge 4 will boost the company's production capacity by 28%, making Borouge's Al Ruwais production site the world's largest integrated single-site polyolefin complex.

"I am also pleased to announce a new expansion project. Our second ethylene unit (EU2) is advancing plans to increase our total production of olefins and polyolefins by 230,000 tonne after project completion in 2028 and is expected to contribute approximately $220 to 250 million to Borouge's revenue per year.

"Internationally, the company is pursuing accelerated global growth opportunities, including an opportunity in the Asia Pacific region that has reached feasibility stage. I am confident that Borouge will continue to deliver unparalleled performance and growth in 2024 and beyond, supported by its robust business model and focus on innovation and AI technology."

Hazeem Sultan Al Suwaidi, CEO of Borouge, commented, "The significant USD1.3 billion dividend from our 2023 earnings reflects the success of our business strategy and our operational resilience in a challenging market environment. Our outstanding operational and commercial excellence yielded exceptional performance compared with our global peers.

"This was supported by a highly effective Value Enhancement Programme, which enabled us to successfully optimise revenues and streamline costs amid softening prices globally. We will explore in parallel further levers to enhance our competitive cost position. Once operational, Borouge 4 will significantly increase our capacity by 28% while enhancing our product portfolio and margin. Our focus remains on sustainable growth and delivering value, with our shareholders set to profit from exceptional recurring dividends in the years to come."

Borouge successfully navigated the bottom of the cycle and delivered a significant USD1.0 billion in net profit in 2023. Borouge's $607 million Value Enhance Programme contributed a significant 28% to 2023 EBITDA, the highest total impact in any single year of any announced programmes by peers.

The company achieved record sales volumes of 5.1 million tonnes, driven by exceptional production and industry-leading asset utilisation rates, adding approximately 200,000 tonnes in polyolefins sales, which contributed to $106 million EBITDA in 2023.

As a result of these initiatives, Borouge outperformed its regional and international peers with one of the highest EBITDA margins in the industry at 38%. By continuing to actively manage costs and adapt to evolving market dynamics, Borouge expects to sustain these substantial efficiencies and value.

Borouge will distribute a total of $1.3 billion in dividends for 2023, following AGM approval of a final dividend of $650 million, equivalent to 7.94 fils (AED0.0794) per share, representing a 6.4% dividend yield based on the latest share price.

Looking ahead, Borouge intends to pay a USD1.3 billion cash dividend for the full year 2024, equivalent to 15.88 fils (AED0.1588) per share. Driving operational excellence and innovation with digitalisation and AI

Digitalisation and artificial intelligence (AI) are integral drivers of innovation, efficiency, and value creation across Borouge's operations, facilitating operational excellence and catalysing the development of cutting-edge solutions.

Borouge has embarked on several AI and advanced technology initiatives, which delivered USD58 million in value to date in 2023. The company targets several significant milestones that would enable the realisation of around USD280 million in value generation in the coming years.

Its Innovation Centre facilitated the introduction of eight groundbreaking products in 2023, including a pioneering solution for gas pipes that is now globally recognised for its unrivalled safety and reliability standards.

We remind, Borouge announced that it has established offices in Kenya and South Korea as part of its strategic initiative to expand its market share in high-growth geographies. With a sales and marketing office in Singapore, Borouge’s expanded, on-the-ground presence in Kenya and South Korea enhances its extensive international sales and supply chain infrastructure. Its global footprint now includes 14 international offices across key markets in the UAE, China, Egypt, India, Japan, and Southeast Asia.

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Petrochemical industry invests record amount in R&D despite downturns

Petrochemical industry invests record amount in R&D despite downturns

Despite a downturn in the industry, petrochemical companies in South Korea have reportedly invested a record amount in research and development (R&D), said Businesskorea.

This move is interpreted as part of a differentiation strategy to enhance competitiveness in new business areas such as high-value added (specialty) materials, in response to aggressive expansion by China.

According to industry sources on March 31, four domestic petrochemical companies -- Lotte Chemical, Kumho Petrochemical, Hanwha Solutions, and LG Chem (excluding LG Energy Solution) -- all spent record amounts on R&D last year. LG Chem’s R&D expenditure amounted to 1.04 trillion won. This marks the first time its R&D expenditure has exceeded 1 trillion won. Hanwha Solutions, Lotte Chemical, and Kumho Petrochemical spent 215 billion won, 120 billion won, and 63 billion won on R&D, respectively.

The proportion of R&D expenses in revenue is also increasing. Last year, LG Chem’s R&D expenses accounted for around 4 percent of its revenue, showing a 1 percentage point increase compared to the previous year. Hanwha Solutions, which remained in the early 2 percent range in 2022, also rose to 2.94 percent last year. During the same period, Kumho Petrochemical saw a slight increase in the proportion of R&D expenses from 0.74 percent to 1 percent and Lotte Chemical from 0.47 percent to 0.6 percent.

Domestic petrochemical companies are being hit hard by oversupply resulting from China’s expansion. With deteriorating market conditions and poor performance, they are resorting to selling off their major subsidiaries and assets. LG Chem sold its polarizing film business, including polarizing plates and polarizing plate materials, to a Chinese company last year. Lotte Chemical is considering selling its petrochemical production base in Malaysia, Lotte Chemical Titan (LC Titan). The sale of the Pakistan subsidiary, which fell through this year, is planned to be reinitiated by the end of the year. Kumho Petrochemical sold its entire stake in a latex joint venture factory in China, which it has operated since 2009.

In addition, the petrochemical industry is strengthening new business areas such as materials. LG Chem, for instance, is notably expanding its production capacity of carbon nanotubes, a battery material, to over 6,100 tons, more than double its current capacity. CNT boasts strength 100 times that of steel, making it a next-generation material.

Lotte Chemical has set a goal to expand the proportion of specialty material sales to 60 percent by 2030. At the shareholders’ meeting held on March 26, the company added the clean hydrogen business to its business objectives.

Kumho Petrochemical has identified three major growth businesses, which are electric vehicle solutions, eco-friendly bio, and specialty materials.

Hanwha Solutions is focusing on caustic soda. Caustic soda is used in the production process of cathode materials, a secondary battery material, to remove impurities. The company is currently working on increasing its production capacity of caustic soda from 842,000 tons to 1.11 million tons.

We remind, INEOS said that it has completed acquisition of TotalEnergies’ 50% share in their three joint ventures, as well as some other infrastructure assets in France, said the companies. The targets are Naphtachimie, Appryl and Gexaro, which were 50:50 joint ventures between INEOS and the French energy major at Lavera in southern France. Financial details of the acquisition were not disclosed.

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Avient introduces low shrinkage grades as an alternative to ABS for luxury packaging

Avient introduces low shrinkage grades as an alternative to ABS for luxury packaging

Avient Corporation announced the introduction of new Gravi-Tech Density Modified Formulation grades with low shrinkage, said Omnexus.

These offer luxury packaging customers an alternative to acrylonitrile butadiene styrene (ABS) based materials.

Many OEMs and plastic injection molding companies in the packaging industry are prioritizing the replacement of ABS. This decision is primarily influenced by recent regulatory requirements such as California’s Proposition 65. This includes the monomers acrylonitrile, butadiene, and styrene, and a recent French law prohibiting styrenic materials in packaging. While polypropylene (PP) is widely accepted in the packaging industry, it has higher shrinkage rates than ABS. This makes it challenging to use as a direct replacement for existing molds.

To enable customers to use their existing ABS molds, Avient has developed new PP-based grades with comparable shrinkage to traditionally used ABS materials. The Gravi-Tech™ Density Modified Formulations 5200 MS series offers customers an excellent option for ABS replacement within the luxury packaging market, allowing them to use their existing ABS molds. The new grades are also suitable for electroplating, which provides the look and feel of metal, making them a suitable choice for bottled alcohol and cosmetic caps and closures.

“Market dynamics and regulations are always evolving, and at Avient, we are committed to continuously developing new solutions that help our customers overcome any challenges they may face,” said Matt Mitchell, director of Global Marketing, Specialty Engineered Materials at Avient. “These new solutions have been modified for low, isotropic shrinkage and electroplating, providing a cost-effective and comparable alternative to ABS for use in luxury packaging.”

The new Gravi-Tech™ 5200 MS grades are manufactured in Europe and commercially available worldwide. To support customer needs, manufacturing of these grades may be translated to other Avient sites in North America and Asia.

We remind, INEOS said that it has completed acquisition of TotalEnergies’ 50% share in their three joint ventures, as well as some other infrastructure assets in France. The targets are Naphtachimie, Appryl and Gexaro, which were 50:50 joint ventures between INEOS and the French energy major at Lavera in southern France. Financial details of the acquisition were not disclosed.

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ADNOC cuts Upper Zakum oil exports sharply after diverting supply to refinery

ADNOC cuts Upper Zakum oil exports sharply after diverting supply to refinery

Exports of Upper Zakum crude from the United Arab Emirates fell sharply in March after ADNOC diverted more supply to its own refinery and boosted shipments of its lighter Murban oil, according to traders, analysts and shipping data, said Hydrocarbonprocessing.

The swap in oil grades at Abu Dhabi National Oil Company's (ADNOC's) Ruwais refinery has tightened medium-sour crude supply in Asia, limiting the number of Upper Zakum cargoes that can be delivered during S&P Global's price assessment process for Middle East crude Dubai and supporting the benchmark.

"They invested a lot of money over at least 3-4 years upgrading Ruwais to run heavier grades so it makes a lot of sense to run Upper Zakum and sell Murban," said Adi Imsirovic, director of Surrey Clean Energy.

"Barrel-for-barrel, Murban brings more revenue for equal compliance," he added, referring to production quotas that the United Arab Emirates has agreed to as a member the Organization of the Petroleum Exporting Countries (OPEC). ADNOC declined to comment.

In 2018, ADNOC invested $3.5 billion to upgrade its 837,000-barrel-per-day (bpd) refinery to process up to 420,000 bpd of heavier and more sour crude including Upper Zakum, according to the company's website.

ADNOC started shipping Upper Zakum crude to its refinery in September, with volumes reaching 200,000 to 300,000 bpd in February and March, according to traders.

Kpler data showed the share of Upper Zakum crude to Ruwais hit 366,000 bpd in March, or 40% of overall shipments, up from 152,000 bpd in February. Rystad forecasts Upper Zakum exports at about 650,000 bpd in March, down from a monthly average of 940,000 bpd in 2023.

Middle East medium-sour crude exports have fallen as new refineries in Kuwait, Oman, the UAE and Saudi Arabia demand local crudes, said Janiv Shah, Rystad's vice president of oil markets.

"The largest importer of Upper Zakum and Middle Eastern medium sour barrels is China, who must pivot to importing similar grades as Chinese country level refinery runs increase through 2024 on demand increases, yield shifts and new refinery capacity," he added.

Exports of Upper Zakum to China, India, South Korea, Thailand and Singapore fell about 50% or more in March from a year earlier, Kpler data showed, while supply to Japan slipped 13%.

ADNOC notified term customers late last year that their Upper Zakum supply for 2024 will be reduced and offered to replace it with Murban, its flagship grade.

With less Upper Zakum supply and more Murban in the market, the medium-sour Dubai benchmark has tightened while Murban futures, the light-sour price marker, has weakened, Imsirovic said.

Asian refiners have turned to similar quality oil from Qatar and Saudi Arabia to replace Upper Zakum, traders said, as Murban is of a lighter quality.

Last week, ADNOC increased Murban export forecasts from June to October to between 1.631 million bpd and 1.658 million bpd. Kpler data showed exports averaged at 1.1 million bpd in 2023.

The jump in Murban supply has weighed on prices, narrowing its gap with Upper Zakum to about 10 cents a barrel, versus the typical 80-cent gap, a Singapore-based trader said.

We remind, ADNOC announced that it has formally closed the acquisition of a 24.9% shareholding in OMV AG, a global energy and chemicals group, headquartered and listed in Vienna, Austria, from Mubadala Investment Company. The transaction accelerates delivery of ADNOC’s global chemicals growth strategy, and reinforces its status as a responsible, long-term partner and growth-oriented investor. Financial details were not disclosed.

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More than 20% of global refining capacity at risk of closure due to weakening refining margins

More than 20% of global refining capacity at risk of closure due to weakening refining margins

Recent analysis by Wood Mackenzie finds that, based on forecasted 2030 net cash margins, 121 out of 465 screened refineries are at some risk of closure. This represents a cumulative 20.2 million b/d of refining capacity, or 21.6% of global 2023 capacity, said Greencarcongress.

The future viability of refinery facilities will be dependent on a combination of factors. First, refining margins will start to weaken by the end of the decade as fossil fuel demand declines. In OECD countries, transport fuel demand will start to fall from 2025, while the unwinding of free allowances for carbon emissions will also impact European net cash margins from 2030 onwards.

China will see liquid demand peak by 2027 and start to fall as the country actively electrifies its road transport. Non-OECD countries will enjoy continued demand growth beyond 2030, but their refiners will not be immune as global demand for transport fuels falls.

Although petrochemical integration can help make refineries more profitable, integrated sites account for nearly half of the global capacity at risk by 2030. Asia Pacific and Chinese facilities in particular benefit little from petrochemical integration, as petrochemical yields are often limited and mainly focused on aromatics, which is suffering from chronic oversupply.

Second, in the future carbon taxes could make up a significant portion of operating costs, depending on a given site’s specific emissions. Location will be a key factor in this respect, as in the absence of international agreement on carbon pricing, rates will vary by region.

WoodMac considered the total cost of Scope 1 and 2 emissions for refineries in the analysis, and found Europe to be most heavily impacted. Increasing carbon prices and the phasing out of free allowances, combined with a lack of planned decarbonisation investment, results in 11 sites in Europe that are considered at high risk of closure.

Third is ownership. WoodMac’s ownership ranking reflects the importance of an asset’s non-commercial factors, such as social value, on its continued operation. In general, most capacity at risk is owned by national oil companies (NOCs), independents and joint ventures (JVs). Of the three types, the future of NOC refineries is considered more secure than independent refineries and JVs, since host governments are likely to support an asset even if it is unprofitable.

Although refineries owned by international oil companies (IOCs) tend to be at lower risk, the high cost of carbon emissions in Europe mean IOC-owned facilities make up a significant portion of sites under threat in the region. Standalone sites with high emissions will typically be the first to face closure or be sold.

Fourth is the strategic value of an asset. For NOC refineries, the host government’s view on its role in the wider economy will be an important factor. Changes in a country’s net trade position if a site closes are taken into consideration, as well as an assets contribution to security of domestic supply.

Fifth are environmental investments. As stakeholder pressure grows and governments increasingly commit to the energy transition, taxes, allowances and regulations for heavy-emitting sectors including refining will be adjusted accordingly. Given that their products are inherently emissions-intensive, refiners will need to pursue broad-based strategies to limit exposure to transition risk.

We remind, INEOS said that it has completed acquisition of TotalEnergies’ 50% share in their three joint ventures, as well as some other infrastructure assets in France. The targets are Naphtachimie, Appryl and Gexaro, which were 50:50 joint ventures between INEOS and the French energy major at Lavera in southern France. Financial details of the acquisition were not disclosed.

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