Orlen eyes potential suspension, cancellation of delayed Olefins III project in Poland

Orlen eyes potential suspension, cancellation of delayed Olefins III project in Poland, said Reuters.

Strategic review announced as estimated project costs soar almost fourfold to $12.6 billion from original cost budget; project is “unprofitable” at current scale.

Polish oil refiner Orlen (PKN.WA), opens new tab will not continue with its Olefins petrochemical project in its current form and will decide by December between "optimising", suspending or terminating the investment, the company said.

The company had said on Wednesday that continuing the investment under existing plans would mean delaying its completion until 2030 and imply costs of between 45 and 51 billion zlotys ($12.65 billion). "The choice of scenarios is driven by the protection of the company's interests and is based on analysis of the petrochemical market, macroeconomic situation, and the profitability of the project," the company said.

With billions of zlotys already spent on the Olefins project, Orlen said it faces a choice of weather to terminate it and pay several billion zlotys in costs or complete it. "My dream would be for the 14 billion zloty invested in it to be used sensibly," Ireneusz Fafara told reporters on Thursday. "If we look at how much money we need to spend to complete it, we would like this money to be also used on sensible projects that bring a fair rate of return, this our dilemma."
The project has already needed several investment writedowns. Fafara said Orlen would decide its fate before the company publishes an updated strategy in December.

"Although it's late to decide to halt work on the project, this is the construction that has caused the most controversy among minority investors", said Erste Group analyst Jakub Szkopek. "The market should react positively due to the increase in FCF (free cash flow) in the years to come", he added. As of 0955 GMT, Orlen shares were up 2.2%, in line with gains in Poland's blue-chip index.

We remind, PKN Orlen began a project to expand the olefins complex at its Plock plant in Poland in 2021. The project is estimated to cost $3.68 billion. The Olefins III project envisages an increase in olefins production capacity from the current 640 thousand tons to 1 million tons.

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Air Products reported a net income of $793.0 million for its fiscal fourth quarter ended September 30, up 13% year on year on strong results in Asia and Europe and positive pricing in the Americas, said the company.

Adjusted EBITDA was $1.41 billion, up 12% year on year. Sales were $3.19 billion, flat year over year as 1% higher volumes and pricing were offset by 2% lower energy cost pass-through. The volume increased compared to the prior year due to higher on-site volume including new assets, being only partially offset by lower merchant sales. Volume was up 5% sequentially over the June quarter.

Adjusted earnings of $3.56 per share were up 13% and eight cents above consensus analyst estimates, as reported by S&P Capital IQ. Air Products posted full-year sales of $12.10 billion, down 4% year over year, on 5% weaker energy cost passthrough, even volumes, and 1% higher pricing. Adjusted full-year net income was up 8% to $2.77 billion with adjusted full-year earnings per share at $12.43.

The company also announced an update for its president search, which was started in August 2024. The company said it anticipates the announcement to take place in the first half of fiscal 2025. The president will also sit on the board and the search is being led by the board’s lead director, Edward Monser. Candidates will “preferably” be current or former public CEOs. Earlier this year, activist investor Mantle Ridge acquired a $1-billion stake in the company and pressed for details surrounding the succession planfor chairman, CEO and president Seifi Ghasemi.

Americas segment operating income of $448 million increased 13% year on year in the quarter due to higher pricing, especially in merchant. Americas sales of $1.31 billion were down 3%, due to 5% lower energy cost pass-through and 1% unfavorable currency, partly offset by 3% higher pricing. Volumes were even as higher on-site demand was offset by lower merchant demand.

Asia segment operating income was $244 million, up 24%. Asia sales of $861 million increased 7%, due to 7% higher volumes and 1% better energy cost pass-through offsetting 1% lower pricing. On-site demand drove higher volumes for the quarter.

Europe’s operating income of $207 million increased by 23% primarily due to broad-based higher pricing. Segment sales of $731 million increased 3% from the prior year as 2% higher pricing and 2% favorable currency beat out 1% lower energy cost pass-through. Volumes were even as new on-site assets in Uzbekistan were offset by lower merchant demand. Middle East and India equity affiliates income $92 million up from no income in the prior year quarter.

Air Products also announced that its $4.5-billion joint venture to produce green hydrogen in North Texas is no longer being pursued. The project never reached FID and the company has sold its development rights to its project partner. Air Products said that the project did not meet its established guidelines for new, low-carbon projects. “We do not make FID until we have an anchor customer and until we have loaded 75% of our existing facilities,” Ghasemi said.

Additionally, Air Products has said that its partnership with World Energy for a $2-billion sustainable aviation fuel production and distribution hub in Paramount, California, is on hold as the companies await permits, which has been challenged by an environmental group.

Looking ahead to 2025, Air Products expects full-year fiscal adjusted earnings per share to be $12.70-$13.00, which is up 2% to 5% versus the prior year. First quarter earnings per share guidance is expected to be $2.75-$2.85, down 2% to up 1% year over year. Air Products also expects capital expenditures in the range of $4.5 billion-$5.0 billion for fiscal 2025, which would be lower than fiscal 2024’s $5.15 billion and 2023’s $5.22 billion.

Ghasemi said its expectations in the first quarter are “a conservative approach” due to questions around demand development in Asia, especially in China. Seasonally, its fiscal first quarter is weakest for Air Products.

The company also divested its LNG business in September for cost reduction and productivity actions, and going forward, Air Products expects a headwind on earnings of about 4% for full-year 2025.

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Braskem SA (Sao Paulo, Brazil) has reported a third-quarter net loss of $106 million, up 85% sequentially from a loss of $708 million and up 79% year over year from a loss of $497 million, said the company.

Braskem cited improved price spreads and the restoration of operations at its Rio Grande do Sul complex. Sales totaled $3.835 billion, up 5% sequentially and up 12% year over year. Adjusted earnings per share came to a 12-cent loss, well above the analysts’ consensus estimate of a 94-cent loss as compiled by S&P Capital IQ.

International petrochemical spreads continued to improve during the quarter, although higher maritime freight costs resulting from attacks on shipping in the Red Sea affected trade flow and pricing in Asia, said Braskem. Scheduled and unscheduled shutdowns in several regions also contributed to the increase in spreads. Market demand in Brazil declined sequentially, but the company’s own sales volume increased due to the resumption of operations at Rio Grande do Sul.

Braskem noted that its first leased ethane ship, the Brilliant Future, was launched in September, with delivery for operation scheduled for January. “The dedicated logistics will last for 15 years, ensuring Braskem Idesa’s operational stability,” said the company. Braskem Idesa, the company’s Mexican polyethylene (PE) joint venture with Grupo Idesa, has been plagued by ethane supply shortages. Braskem said construction of an ethane import terminal that will supply Braskem Idesa is 87% complete.

The Brazil/South America segment turned in recurring EBITDA of $335 million, up 45% sequentially on increased volumes for resins and chemicals in Brazil and for export and increased resin spreads. Sales totaled $2.7 billion, up 7%. Resin demand in Brazil declined 5%, reflecting lower demand for PE from the beverage sector, higher PE inventory levels in the chain and lower PVC demand, but resin sales volume increased 6% on the resumption of production at Rio Grande do Sul.

The US and Europe segment turned in recurring EBITDA of $71 million, up 53% sequentially on the optimization of the sales mix and flexibility in purchasing propylene in the US, partially offset by an 8% decline in volume, said Braskem. Sales totaled $919 million, down 5%, mainly due to the lower volume caused by lower feedstock resales in Europe.

The Mexico segment turned in recurring EBITDA of $80 million, up 44% sequentially, mainly owing to a 6% increase in the international PE spread, said Braskem. PE demand in Mexico increased 11% on inventory build, but the company’s PE sales volume declined 11% on lower availability for sale. PE capacity utilization dropped owing to a 35-day maintenance outage as well as reduced ethane imports.

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Novacid has declared force majeure on deliveries of products including hydrochloric acid from its Pont-de-Claix, France, unit, according to a Seqens Group (Ecully, France) customer letter issued Oct. 25 and seen by S&P Global Commodity Insights on Nov. 5.

Novacid is a Seqens subsidiary that produces about 5,500 metric tons per year of hydrochloric acid and 8,000 metric tons per year of isopropyl alcohol at the site.

A company source said that Novacid had little choice but to declare force majeure on hydrochloric acid supply due to the industrial action taken by the Vencorex (Saint-Priest, France) unions at Pont-de-Claix.

“A social movement [strikes] is ongoing since Oct. 23 at Vencorex, which has significantly disrupted the activities of the Pont-de-Claix platform, including notably the reception and shipments of Novacid,” the customer letter said.

“If Vencorex stops there is no more hydrochloric acid in our plant. We are the biggest supplier of hydrochloric acid in France and currently, we are delivering zero. What will be the future? Dramatic,” the Novacid source said Nov 5.

Platts, part of Commodity Insights, assessed European hydrochloric acid contracts for delivery in the current and next quarters unchanged on the week at €145 per metric ton Nov. 5.

We remind, French manufacturer Seqens plans to close phenol and acetone production at its Le Peage-de-Roussillon plant in France for scheduled maintenance in early August. The capacity of the two lines is 175,000 tons of phenol and 108,000 tons of acetone per year. Repair work at both plants lasted 2 weeks.

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The average utilization rate of European chlor-alkali plants and chlorine output both slipped to new year-low levels in September, according to data from regional industry body Euro Chlor (Brussels).

The monthly plant capacity utilization rate fell to 61.6% from 66.1% in August, the year’s previous lowest level. The rate was up slightly, however, compared to the prior year’s figure of 60.9%.

Chlorine production for September fell to 606,690 metric tons, at a daily average of 20,223 metric tons, declining by 6.8% compared to August but 2.9% higher than the year-earlier period.

Caustic soda stocks in Europe of 228,680 metric tons in September were 5.7% higher than the previous month but fell 12% year over year from 261,042 metric tons.

Euro Chlor represents 38 member companies that produce chlorine at 62 manufacturing locations in 19 countries.

Platts, part of S&P Global Commodity Insights, calculated the October chlorine contract price at €213 per metric ton on Nov. 5, up €4 from Oct. 1, when the price stood at €209 per metric ton. The Oct. 1 price was €7 higher than the Sept. 3 price, comparatively.

Platts assessed the CFR Mediterranean caustic soda spot price at $625 per dry metric ton and assessed FOB Northwest Europe caustic soda at $545 per dry metric ton on Nov. 5, unchanged on the week.

The supply tightness previously seen was easing as operational issues were resolved and as feedstock costs firmed. With a number of production issues resolved and demand seasonally weak, prices were seen cooling for both spot and contractual supplies.

“Prices are falling to €790-€800 per dry metric ton FD Spain right now,” a distributor said. “Demand is very weak and Ercros has lifted [its force majeure].”

In October, Spanish chlor-alkali and polyvinyl chloride producer Ercros lifted its force majeure on chlor-alkali supplies from its Vilaseca I plant at Tarragona. Ercros had declared force majeure at the start of September due to issues related to the supply of salt that affected other suppliers in the Iberian region.

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