Reliance records lower income at refining, petchem business despite firm demand

Reliance Industries Ltd. (Mumbai) reported that its oil-to-chemicals (O2C) business EBITDA decreased 14.3% year over year to 130.9 billion Indian rupees ($1.6 billion) in the fiscal first quarter ended June 30, due to lower transportation fuel cracks, particularly gasoline cracks which was down 30% year over year, said the company.

Downstream chemical margins were also lower. First-quarter sales rose by 18.1% year over year compared with the prior-year quarter to 1.5 trillion rupees on higher fuels pricing and improved volumes supported by strong domestic demand. The O2C business focuses on refining and petrochemical production.

In Reliance’s polymers business unit for the first quarter, the company said that the polymer margins were down by 1%-17% year over year due to firm naphtha prices. Polyethylene (PE) margin over naphtha was lower at $330 per metric tons against $397 per metric ton in the earlier period. Polypropylene (PP) margin over naphtha declined by 16.5% year over year to $318 per metric ton.

Polymer domestic demand increased by 8% year over year. PE, PP, and polyvinyl chloride (PVC) demand increased by 2%, 9% and 20% respectively, majorly driven by continuing focus on government schemes for agriculture and infrastructure, it added. Growth in consumer durables, automotive and packaging sectors also contributed to incremental demand.

Reliance said that the polyester chain delta declined 15% year over year due to weaker para-xylene (p-xylene), purified terephthalic acid (PTA) and monoethylene glycol (MEG) deltas. Polyester chain margin was $489 per metric ton, down 14.8% year over year. During the first quarter, p-xylene and MEG margin over naphtha decreased due to increase in naphtha price. PTA margins were negatively impacted due to high inventory with Chinese producers and increased competition, it added. Downstream polyester margins remained stable.

The company reported 5% year over year higher domestic polyester demand, driven by strong growth in polyethylene terephthalate (PET), which was up 27% due to higher demand from the beverage segment on account of summer season and elections, said Reliance. Polyester staple fiber (PSF) demand grew by 9% year over year with normalization of cotton prices while polyester filament yarn (PFY) demand decreased by 4% with higher fabric imports, it added.

We remind, the Supreme Court of India (SCI) has ordered the Indian government to impose temporary anti-dumping duty (ADD) on imports of low-density polyethylene (LDPE) from Saudi Arabia, Singapore, Thailand and the US. The Chemical and Petrochemical Manufacturers Association (CPMA) approached the Supreme Court after the government failed to implement the tire tariffs in 2022.

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PJSC Kamaz saw net profit to Russian Accounting Standards plunge 95% year-on-year to 641.1 million rubles in H1 2024 from nearly 13 billion rubles in H1 2023, the automaker said in a financial statement.

The auto group saw revenue drop 14.9% to 156.3 billion rubles in the reporting period.

"Last year's positive financial results exceeded the previous year's figures, as the year was not typical in terms of the company's activities. We can therefore talk about the high base effect as based on the results of the first half of this year. The company is gradually returning to more familiar financial indicators. It is also worth noting that the hikes in the key rate of the Central Bank of Russia negatively affected the financial indicators for the first half of the year. Meantime, the group overall assesses the current financial results as stable," the group's press service told Interfax about Kamaz's financial results.

The company has noted separately that ramping up manufacturing of the new range of K5 model trucks has been among the factors pressuring the indicators.

"Production of trucks in the K5 model range increased by over 37% to 2,963 vehicles in the first half of this year from 2,157 vehicles in January-June 2023. Meantime, the cost of K5 vehicles is higher than that of trucks within the traditional Kamaz model range, including taking into account the import substitution program," the press service said.
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SFI , formerly known as Safmar Financial Investments, has completely divested its stake in Russian oil company Russneft, a spokesman for the investment group said.

In a disclosure of a material fact published Wednesday, SFI said its stake in Russneft dropped 9.848616% to 1.120394% at the beginning of May.

"PJSC SFI did in fact carry out a number of exchange and over-the-counter transactions in the second quarter of 2024, as a result of which it reduced its equity stake in oil company PJSC Russneft to zero. The sale of shares from the portfolio of financial investments, which included the Russneft shares, upon reaching an attractive price is consistent with the principles of our investment activities," the SFI spokesman told Interfax.

We remind, Rosneft has launched a project to adapt technologies for controlling fugitive emissions of methane and other hydrocarbons and increasing the level of industrial safety at production facilities of oil refining assets.

SFI is a public investment holding company that owns 87.5% of leasing company Europlan , 49% of insurer VSK, 51% of gaming service GFN.RU and 10.4% of consumer electronics retailer M.Video .

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SK Innovation Co. and SK E&S Co. have announced plans to merge, creating what they call a comprehensive energy company that encompasses the entire value chain of current and future energy sources, as well as electrification businesses such as batteries and energy storage services (ESS), said the company.

If the merger plan is approved at a shareholders’ meeting scheduled for Aug. 27, the merged company will officially launch on Nov. 1.

SK Innovation said that on merging, the combined company will transition into an entity with assets totaling 100.0 trillion South Korean won (USD72.4 billion) and annual revenue of 88.0 trillion won, positioning itself as the largest private-sector energy company in Asia-Pacific.

The merger is designed to address a rapidly evolving external business environment, which includes the prolonged global economic downturn, heightened uncertainty in the energy and chemical sectors, and the “chasm” in the electric vehicle (EV) market, SK Innovation said. Additionally, the merger aims to secure competitiveness in future energy business areas, it said.

SK Innovation was originally a refining company and has expanded its portfolio over the years to include petrochemicals, lubricants and oil exploration. It is now diversifying into future energy sectors such as EV batteries, small modular reactors (SMRs), ammonia and immersion cooling. It is the largest energy company in South Korea.

SK E&S was spun off from SK Innovation in 1999 as a city gas holding company. It has since become South Korea’s leading private-sector liquefied natural gas (LNG) firm by establishing a global LNG value chain. The company is transitioning to a green portfolio that organically integrates its four core businesses — city gas, low-carbon LNG value chain, renewable energy, and hydrogen and energy solutions — to create synergies.

“The merger is significant as it brings together two companies that have each grown to become the leading players in their respective business areas, solidifying their position as the largest private energy company in the [Asia-Pacific] region,” said SK Innovation.

Beyond external growth, the merger will generate synergies in three key areas: enhancing portfolio competitiveness, strengthening financial and profit structures, and securing growth momentum.

The merged company will aim to develop a comprehensive portfolio that spans oil, chemicals, LNG, city gas, power, renewable energy, batteries, ESS, hydrogen, SMR, ammonia and immersion cooling; energy carriers; and energy solutions. Global oil majors are currently also pursuing balanced portfolios across the energy sector through M&A deals, SK Innovation said.

SK Innovation added that the merged company would be able to mitigate the high profit volatility of its petchem business, “which has served as a reliable cash cow, with the stable profit generation capabilities of the LNG, power and city gas businesses.” It added that an analysis of the businesses’ pretax profit volatility over the past 10 years shows that the merged company’s pretax profit volatility will be significantly reduced from 215% to 66%.

By integrating assets and capabilities across the energy and electrification sectors, the merged company will bolster its core competitiveness and profitability, SK Innovation said. For instance, combining SK Innovation’s crude oil refining, crude oil/petroleum product trading and oil exploration operations with SK E&S’s gas development, LNG trading and combined cycle power generation will improve the economics and profitability of exploration and development, it said. Additionally, the shared use of infrastructure such as ships and terminals will enable operational optimization, it added.

The electrification efforts pursued by each company are also expected to gain momentum. SK Innovation said it has been advancing future energy businesses such as EV batteries, ESS and thermal management systems, and that SK E&S has focused on distributed power sources such as renewable energy and district electricity businesses, as well as hydrogen, charging infrastructure and energy solutions. The merged company will be able to combine the products and services of the two companies to create new business models and pioneer new markets, SK Innovation said.

We remind, Seven companies from five countries have teamed up to create a consortium for the production and processing of polyester fiber. The chain was based on Neste's supply of raw materials for polymers and chemicals made from biomaterials. The owner of the project is Goldwin, the consortium also includes Mitsubishi Corporation and Chiyoda Corporation (all three from Japan), SK geo centric (South Korea), Indorama Ventures (Thailand), India Glycols (India) and Neste.

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China domestic PET bottle film industry is facing a situation of overcapacity, said Sunsirs.

In the first half of the year, the total production of PET bottle flakes in China reached about 7.47 million tons, but the domestic market demand only remained at around 4.37 million tons. Although it is expected that 2.85 million tons of products can be digested through export channels, thereby easing some pressure, there is still about 250,000 tons of actual excess capacity left in the industry. Although this number may seem small on the surface, combined with the industry's average operating rate of less than 85% in the first half of the year, it means that nearly 2.5 million tons of production capacity have not been fully utilized.

In this context, PET bottle chip factories have taken proactive measures to adjust their production strategies in response to market changes. Several well-known enterprises, including Hainan Yisheng (750,000 tons), Zhejiang Wankai (650,000 tons), China Resources Jiangyin (600,000 tons), and Anyang Chemical (300,000 tons), have taken the lead in announcing production shutdown plans to reduce excess capacity and optimize resource allocation. In addition, leading companies in the industry such as China Resources, Sanfangxiang, Far East, and Sinopec Yizheng have also released signals that they will further implement shutdown or production line renovation projects.

We remind, Indorama Ventures is closing its terephthalic acid and polyethylene terephthalate plant in Rotterdam, the Netherlands. In April 2024, the concern launched a consultation process regarding the future of the production site. Research has shown a number of challenges faced by Indorama - rising labor, raw material and energy costs, as well as the impact of cheap imports. "Structural shifts in the industry are contributing to the growing divergence in raw material costs between China and Europe. Consequently, the company's asset portfolio needs to be optimized to improve its position and ensure resilience in response to changing market dynamics.

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