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Feedstock Industry Witnesses Price Crash as Demand Evaporates Amid Global Pandemic

Propylene prices dived to five-year lows in the week ending 3rd April 2020. The declining trend is likely to continue with additional volumes piling up across the downstream sectors as the demand outlook seems bearish amid Covid-19. Widening demand-supply gap as plant operating rates fall due to turnarounds as several regions grapple with the government-imposed lockdown measures is likely to put downward pressure on the global propylene prices.

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Feedstock Industry Witnesses Price Crash as Demand Evaporates Amid Global Pandemic

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  1. Edition: 7th April 2020 #TheChemAnalystExpress Feedstock Industry Witnesses Price Crash Key Headlines •Indian refiners to cut down crude imports by almost 50% for April •Meeting of Russia and Saudi Arabia over crude discussions postponed, crude oil fall back •Indonesia’s biofuel production plan halts due to less sugarcane in fields •Lotte Group designing strategy to gain from Covid-19 crisis •India’s ONGC to seek support from government to sustain amid crashing prices Europe Feedstock Pricing (Key Products) •Polyethylene (PE): European cracker margins plummeted as demand remained subdued. PE April contract price was settled at $778 /tonne, down by a record $215/tonne from March. •Vinyl Chloride Monomer (VCM): VCM prices tumbled in Europe and settled at $ 545/tonne FOB North West Europe (NWE), due to weak demand from downstream industries that has led to inventory pileups. •Methanol: Limited buying activities put downward pressure on the European methanol prices. The FOB Rotterdam prices fell to $161 per tonne on Monday. •Butadiene: Waning demand from the elastomer sector as an effect of global turnarounds has further pushed down the spot prices of Butadiene by $100/ tonne to $350/ tonne FOB Rotterdam. Crude Oil Scenario Global prices of crude oil further nosedived on Monday after Russia and Saudi Arabia delayed a critical meet to discuss over implementing a cut in oil production in order to alleviate oversupply in global market. After the last OPEC meet, the two oil producing giants have aggravated their rifts by indulging in a blame game over the fault in crude crises. Hence, pushing the scheduled date of discussion to Thursday that is 9 April. With ongoing crude production, Brent crude further fell to $30.03 a barrel on 02:03 GMT, down by $1.29. Moreover, West Tax Intermediate Crude settled at $26.68 a barrel, with a dip by $1.66. As per analysts, the present situation is critical enough with plummeting demand amid Coronavirus crises and crashing economies. If countries continued to flood the market with crude by overlooking their rifts, there will be no hope left for bouncing back and stabilizing the ground. Feedstock Industry Witnesses Price Crash a as Demand E s Demand Evaporates Amid Global Pandemic vaporates Amid Global Pandemic WTI Crude Brent Crude $35.00 $30.00 $25.00 $20.00 $15.00 $10.00

  2. Global Propylene Weekly Pricing Analysis (1st Week, April 2020) Propylene prices dived to five-year lows in the week ending 3rd April 2020. The declining trend is likely to continue with additional volumes piling up across the downstream sectors as the demand outlook seems bearish amid Covid-19. Widening demand-supply gap as plant operating rates fall due to turnarounds as several regions grapple with the government-imposed lockdown measures is likely to put downward pressure on the global propylene prices. The main consumption of propylene is as a feedstock for polypropylene (PP). Propylene is also used for producing acrylonitrile (ACN), propylene oxide (PO), a wide variety of alcohols, cumene and acrylic acid. Table 1: Some of Asia’s major Propylene Capacities, Company-wise U.S. Propylene (KTPA) Capacity Company Location Plummeting oil and ample stocks have made U.S. March propylene contracts settled lower by about 30% by the end of March and further decline could be observed in the first week of April. Lack of exports and lackluster demand from the downstream PP units further hit the propylene markets as factories remain shut after coronavirus cases in U.S. cross that in Italy and China. Prices were further pressurized as feedstock propane and butane hit 21-year lows during March. Propylene prices in U.S. settled around $600 per tonne in the first week of April. Major U.S. propylene producers are ExxonMobil, Chevron Phillips Chemical, Enterprise Products, Flint Hills Resources and Shell Chemical. Mitsubishi Chem Kashima 2, Japan 260 Idemitsu Tokuyama, Japan 450 Lotte Yeochon, South Korea 500 SK Energy Ulsan 2, South Korea 350 Formosa Mai Liao 3, Taiwan 600 Titan Pasir Gudang 2, Malaysia 260 Pulau Singapore Ayer Chawan, Exxon Mobil 435 CPC Corporation Lin Yuan 6 430 Europe As Europe now turns out to be the new epicenter of the coronavirus spread with 32% of European refineries now offline or at reduced operating rates, the feedstock industry faces strong headwinds in the country. Despite the lowest crude oil prices in decades, refinery margins are sharply lower as the global lockdown has crushed demand for transportation fuels. Europe propylene prices witnessed unprecedented drops in this week to €650 per tonne, down by almost 27 per cent from March. Asia APAC olefins margins are likely to suffer due to poor consumption in the downstream sectors. Propylene prices further lost grounds in Asia as crude oil slipped further after Saudi Arabia and Russia postponed their most-awaited meeting aimed for potential supply cut pact to April 9th. In Japan, production cuts announced by the automobile manufacturers led to propylene inventory pile ups. Moreover, reduced offtake from several downstream Polypropylene supply units as several countries (such as India, South Korea, Malaysia etc.) opted for lockdown measures to contain the spread of the highly contagious virus. Amid poor market sentiment, spot propylene prices have fallen to $557.5 per tonne CFR (cost and freight) NE (northeast) Asia in the first week of April. Propylene prices in India and Europe 1000 800 USD/MT 600 400 200 0 CIF India CFR North West Europe(NWE)

  3. Industry Research International Plant Shutdown News •Molindo Raya to Curtail Bioethanol Production Due to Shortage in Raw Material Availability Indonesia’s Molindo Raya bioethanol plant is equipped with a production capacity of 80000 kilolitres of fuel grade ethanol every year. However, the company is struggling to keep up with the production due to shortage of feedstock sugarcane in the country. Hence the company has curtailed the production in its bioethanol plant owing to the limited availability of raw material. Although the government is looking forward for an effective solution in balance with the economic feasibility. •Yokohama Temporarily Shuts Production at Tire Plant in Salem Amid Pandemic Concerns Yokohama, a downstream elastomer industry in Santa Ana, North America engaged in the manufacturing of tires has announced temporary shut in operation at its plant in Salem. The company undertook this shutdown on 5 April which is anticipated to last for a minimum of two weeks. Purpose behind this shut down is the health and safety of its employees against novel Coronavirus. As of now, the company has rich in-built inventory to serve the existing orders and for any sudden pickup in demand. •Caltex to Undergo Refinery Shutdown Due to Plummeting Oil Demand Australia’s oil producing giant Caltex announced the temporary turnaround of its refinery in Brisbane for maintenance in May. Earlier, the maintenance turnaround was scheduled in July but due to hard hit demand by Coronavirus the company has decided to preschedule the turnaround. According to authorities, the refinery will not be operational until demand crises improve, and market is stabilized. India Plant Shutdown News •BASF India Halts Manufacturing Operations Across India Over Rising Concerns of Covid-19 BASF India, a subsidiary of BASF engaged in the production of chemicals has halted production operations across India leaving certain essential services. The company has undertaken this temporary shut-down in support of the government initiatives to constrain the spread of Coronavirus. According to the authorities, the duration of shutdown completely depends on government directives and ongoing situation. •Jubilant Life Sciences to go for Temporary Turnaround at its Mysuru Plant Jubilant Life Sciences has reported to halt operations in its Mysore plant after an employee was tested positive on March 26. The deputy commissioner of the town ordered the complete shut as the report broke out however, shutting down the plant at one go could trigger indefinite chemical accident so a sought time is issued. The medium of the infection is still unknown as no employee has informed of any travel history. Strategic Business Expansion Lotte Group Eyes Chemical Expansions Amid Covid Stress As the coronavirus creates havoc in the global chemical industry, the South Korean giant Lotte Group is strategizing its expansion and laying down ambitious plan to increase its revenue from its chemical business in the next 10 years and challenge its competitors Dow and ExxonMobil Chemical. Lotte Group chairman Shin Dong-bin seems opportunistic of situation and is instead looking for Mergers & Acquisitions opportunities during the downturn, a strategy that most Korean businessmen consider too risky. As per the company’s chairman, the chemical industry offers opportunity to generate revenue from wide streams and offers barriers to the newcomers. The company is working towards its 10- year growth plan to be a top-seven chemical producer in the world, aiming for annual sales of about USD 45 billion by 2030. As per the recent article published in Forbes, like the company made its first overseas acquisition of Titan Chemicals post the 2008 financial crisis, the company would seek to buy weaker companies in this economic downturn. Looking at the company’s weakness in the downstream sectors, it is anticipated that the company will be especially interested in acquiring the specialty chemical companies.

  4. Mergers and Acquisitions •Nouryon to Secure Metal Alkyl Business of Sasol Nouryon, a global specialty chemicals leader has entered a pact to acquire the merchant triethyl aluminium (TEAL) business of Sasol. The acquisition is aimed at extending Nouryon’s reach in the global metal Alkyls market, followed by a capacity expansion at Rotterdam complex and another acquisition of a Chinese company. According to the president of the company, this acquisition will help in establishing better relationship with customers by diversifying company’s product catalogue. Latest Technological Investments •BPCL Develops Game Changing Technology to Assay Crude Oil Bharat Petroleum Corporation Limited (BPCL), a renowned petrochemical company in India has announced the development of a salient technology to analyze the quality of crude oil. The technology is said to be a ‘crude horoscope predictor tool’ and is called BPMarrk, it is efficient enough to test diverse properties of crude oil by examining four parameters and generates the result within an hour. It is being looked as a game changing advancement in the petrochemical sector as it will help save a good amount of time from the traditional methods that took about 30-45 days for completion. The current cost of operations is not decided yet, but the authorities stated that it could be nearly a fraction of the present cost of testing that is around INR 2.5 Million. Get the Chemical and Petrochemical Industry News on Daily Basis, Weekly- Trend & Forecast and Monthly-Analyst Views Subscribe Today! News on WhatsApp/WeChat/Mail First 15 days free news WhatsApp No. +91-9914868686 For sales related query, dial +91-9958299626 or email at sales@chemanalyst.com About ChemAnalyst About ChemAnalyst ChemAnalyst is ‘one stop’ online portal that offers comprehensive market intelligence data and in-depth analysis on the Indian chemical and petrochemical industry. Our aim is to provide competitive advantage to the industry stakeholders by offering ‘cutting edge’ information and analysis that help our customers leverage on the emerging opportunities in their businesses. ChemAnalyst’s team of 100+ analysts are engaged in tracking Chemical Prices daily, production capacity, demand and supply outlook, manufacturing plant locations, foreign trade data and news/deals for more than 400 major chemicals produced in India. ChemAnalyst’s Interactive subscription platform provides the most comprehensive data and analysis in your industry to help you decide the future. ChemAnalyst is promoted by TechSci Research (TSR). TSR is an award winning research based management consulting firm providing market research and advisory solutions to the customers worldwide, spanning a range of industries including Chemicals & Material, Automotive, Consumer & Retail, ICT, Energy & Power, Aerospace & Defense, Water and Waste Management, BFSI and more. For more information, please visit us at www.chemanalyst.com

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