Oil Prices Slide as Demand Weakens Amid Fears of the Delta Variant

Crude Oil prices continued to slide for fifth consecutive day as the demand for Oil weakens amid fears of the Delta Variant. The demand has weakened as the use of rail, road and air remained constrained in the wake of surging COVID cases globally.

Brent Crude was down 5 cents (0.1%) at USD 68.98 per barrel on Wednesday after falling 0.7% on Tuesday.

In the Asian markets, the demand has weakened because of China’s industrial and retail slowdown, floods, port constraints amid the coronavirus pandemic, and with the government clamping down on import quote of private refiners.

In India also the consumer travel behaviour is severely affected which has slowed down the demand in India. As the global oil price slide down to a lower trajectory, India which is the world’s third largest Oil importer has also started sales of Oil to state-run refiners out of its Strategic Petroleum Reserve (SPR) in a major policy shift.

Another reason for weakening of demand and consequent price decline is a stronger dollar which affects the Crude Oil which is typically priced in dollars therefore an expensive dollar means weaker demand for Crude Oil market price.

In the United States more supply is expected to enter the market. US Shale Oil production is expected to rise to 8.1 million barrels per day in September.

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LANXESS To Expand Production for Polyamides and PBT in China

On November 2021, Cologne-based German specialty chemicals company LANXESS AG release a statement to expand its production network in China. The specialty chemicals company will build a second augmented line for Durethan-and-Pocan branded high-tech engineering plastics at its subsidiary manufacturing site in Changzhou China. An estimated investment of around USD 34 Million will escalate the production capacity by 30,000 metric tonnes per year. Together with the company’s existing facilities in Changzhou and Wuxi will bring the total compounding capacity in China to 110,000 metric tonnes per year. The new line is anticipated to go stream in the first quarter of 2023.

LANXESS is a leading specialty chemicals company with sales of USD 6.91 Billion in 2020. It expanded its operations in 33 countries across the globe and the core business of LANXESS is the development, manufacturing, and marketing of chemical intermediates, additives, specialty chemicals, and plastics. The expansion caters to the strong demand from the consistently growing Chinese Automotive industry. In recent years, the sales of EVs soared drastically and proportionally uplifted the sentiments for the e-mobility segment in the Chinese domestic market. In repercussion, it is driving new requirements for lightweight applications and continuously increases the share of electronic components used in cars.

The e-mobility segment is a major field for LANXESS Polyamides (PA6) and (PA66) compounds application in Durethan, Polybutylene Terephthalate prices (PBT) compounds for Pocan, and the endless fiber-reinforced composites Tepex. LANXESS already offered a wide range of products that meet the high-quality standards and norms for the electronic sector globally in terms of flame retardance, electrical properties, and ecological behavior.

The Durethan and Pocan are high-end plastics and an ideal replacement for the metal parts in motor vehicles. Along with numerous advantages of reducing weight, energy consumption, and related emissions. Its uses extend in engine applications, door structures, body reinforcement, pedals, front ends, etc, and contribute to a weight-saving up to 50 percent.

Polyamides (PA) are a class of polymers, which consists of repeated amide groups as a monomer of the main polymer chain. Polyamide 6 and 66 (or Nylon 6 and 66) are the most common types of Polyamide holding numerous commercial applications. PA 6 is manufactured using Caprolactam, while PA 6,6 is manufactured using Adipic acid and Hexamethylene Diamine (HMDA). PA 6 and 66 are offered either in chips or resin grades in uniform pellets which are further processed to serve two major applications: (1) fibers for textiles such as clothing and carpets or (2) engineering thermoplastics (ETP) used across electrical, electronics and automotive sectors.

Clariant Holds the Baton to Eliminate Nitrous Oxide from Nitic Acid Production with its New Catalyst for Free Selling

The world’s leading speciality chemicals producer, Clariant AG, has launched a novel nitrous oxide-removing catalyst, free for producers worldwide to enable the elimination of nitrous oxide by-product content from the industrially synthesized nitric acid.

The catalyst called EnviCat N2O-S, developed with the company’s proven expertise of rigorous catalyst designing, reports an efficiency of 95% removal of nitrous oxide by-product that results from the synthetic route used for generating nitric acid.

Roughly half of the total nitric acid production units installed globally are not supported with nitrous oxide abatement infrastructure. Clariant with an aim to offset polluting emissions with sustainability in speciality chemicals is extending its developed catalyst for a free refill to ten nitric acid producers having nitric acid production facilities devoid of nitrous oxide off-gas treatment.

Nitric acid is a highly corrosive oxidising agent which is generally prepared using the Ostwald process that involves platinum or rhodium catalysed oxidation of anhydrous ammonia to form nitric oxide which is further reacted with aerial oxygen to produce nitrogen dioxide. Nitrogen dioxide is then absorbed in water to result in the generation of nitric acid. A major share (70-80%) of the global nitric acid production is utilized for the manufacturing of fertilizers. The remaining nitric acid output is exploited as intermediate for explosives, pharmaceuticals, metal treatment, textiles etc.

Nitrous oxide is the unsought by-product formed during the ammonia oxidation step. On average, 6-9 kg of nitrous oxide is released per tonne of nitric acid production. Nitrous oxide, belonging to the category of greenhouse gases, is one of the primary contributors to ozone layer depletion and global warming.

As per ChemAnalyst, the development of EnviCat N2O-S catalyst could be a boon to many producers worldwide who are struggling to deal with the undesired environmentally hazardous nitrous oxide produced from nitric acid units. The idea for providing free refilling of the developed catalyst to a handful of producers will strategically benefit the company by leading to the promotion of their product, strengthening the company’s brand name in sustainable chemical solutions, and facilitating the reduction of the annually released concentration of nitrous oxide in the atmosphere. This catalyst on wide commercial use is also expected to boost nitric oxide production which is often reproached by environmentalists for harming our planet. Enhanced production in future will ensure undisrupted nitric acid supplies to the downstream industries, and stable prices of nitric acid-based products to the customers.

Ethylene Prices in the Asian Markets Suffer Decline

The prices of Ethylene were assessed lower in the Asian markets despite the firm upstream crude and naphtha rates. The reason for the price decline seems to be weaker buying trends in the region coupled with bearish downstream polyethylene demand fundamentals. CFR North-East Asia ethylene prices were assessed at USD 1120 per tonne on Wednesday which showed a drop of USD 15 per tonne from Tuesday’s assessed levels. CFR South-East Asia Ethylene prices were assessed a lower USD 1030 per tonne.

On the supply side, the supply seems to be ample given that Shell’s cracker in Singapore with an ethylene production capacity of 1.15 million tonnes per year which was shut down for a maintenance turnaround in early November has come back online recently. The cracker also has a propylene production capacity of 500000 tonnes per year.

Ethylene is a colourless, odourless, extremely flammable compressed gas with a faintly pleasant odour. It shows slight solubility in water and in liquid hydrocarbons. It reacts with strong oxidants causing fire and explosion hazard. Ethylene is mainly used to make polyethylene. Low density polyethylene and linear low density polyethylene mainly goes into film production for food and non-food packaging. High density polyethylene goes into the blow molding and injection molding applications. Other major uses of ethylene are ethylene oxide (EO), ethylene glycol (EG), vinyl chloride monomer (VCM) for polyvinyl chloride (PVC) and styrene. The global demand for ethylene stood at around 150 million tonnes in 2020 and is expected to grow at a CAGR of 3.5% during the upcoming years till 2030.

As per ChemAnalyst, “the prices of ethylene which have fallen on Wednesday are expected to fall for another week till the last week of November as the supply is sufficient and the buying activity remains stagnant. The prices once reach to relatively low levels will tend to stabilize due to buyers looking for stocking up the excess ethylene in the market.”

Shipping Container Scarcity Cripples Asian Supply Chains, Ethylene Cargoes Appear to be Long Way Off

As the terrible phase of the shipping industry owing to acute shortage of containers continues to extend its wrath with each passing day, the trade of petrochemical olefins in the Asian region gets botched leaving the producers to stare into the abyss.

Asian ports are seen laden with stranded cargoes coming from the United States, Europe, Oceania, and Africa. Singapore port has become a common dumping spot for cargoes, which is intensifying the container backlog issue across the intra-Asia trade route due to the chain effect. The cargo backlogs are causing the imports of ethylene to slim down in Asia. While the ethylene exporting companies find themselves helpless as they are struggling to send shipments on time, thereby failing to take advantage of the firm olefin demand across the Asia Pacific and the regions in the west.

Ethylene is the most notable petrochemical product obtained from oil and natural gas feedstocks upon their thermal cracking. It is widely used as a feedstock for the preparation of a chain of industrially important polyolefins which are extensively exploited in the packaging sector, automobile industry, construction, electronic items, pharmaceuticals, paints and coatings, textiles, rubber production etc.

As per ChemAnalyst, the container crisis is weighing down heavily on the ethylene and related petrochemical spot trading amid the strong-going ethylene demand specifically in the Asia-Pacific region. The crisis is causing the producers and suppliers to lose profit margins. With delayed shipments and soaring freight charges added to the production cost, the downstream sectors are struggling to capitalize on low ethylene supplies at affordable prices. Furthermore, the scenario is becoming catastrophic for small producers who are at risk of getting forced out of business as the market faces a bleak future.

LDPE Prices in the USA Expected to the Continue the Downward Path

Low Density Polyethylene (LDPE) prices in the USA have been falling with mild fluctuations since the past four to five months now. The prices are expected to continue the downward path for the upcoming month also as the demand appears to be stagnant and the prices of feedstock ethylene are falling in the USA. The prices of LDPE were assessed at USD 1995 per tonne in the last week of June, the prices fell to USD 1945 per tonne in the month of July, with the prices falling further to USD 1880 per tonne in the month of August. The prices for the month of October and November are USD 1790 per tonne and USD 1690 per tonne respectively.

The demand has been stagnant due to the declining demand of packaging for online orders after the easing of coronavirus related lockdowns in the USA. Prices of Ethylene have also been falling consistently since July.

LDPE is a versatile, semi-rigid thermoplastic made from monomer Ethylene. LDPE is highly resistant towards moisture and chemicals, that makes it an ideal preference for packaging industry. The product is highly popular in industries requiring materials with toughness, corrosion resistance and low temperature flexibility. LDPE is majorly utilized for manufacturing of containers, plastic bags, dispensing bottles, computer components, tubes etc.

The product is ideally desired for pipes and fittings application due to the offered plasticity and low water absorptivity. Two main methods highly popular for manufacturing LDPE are autoclave and tubular process. Due to higher Ethylene conversion rates provided in the tabular process, it has gained prominent preference over other methods. The global demand for LDPE stood at around 22 million tonnes in 2020 and is expected to grow at a CAGR of around 3.5% during the upcoming years till 2030.

As per ChemAnalyst, “the prices of LDPE are expected to follow the downward trend given that the market appears to remain bearish during the upcoming month also. The demand is expected to pick up in the export market in the first quarter of the next year. This might cause the prices to fluctuate a little bit in the first quarter of the upcoming year.”

Polypropylene Prices Expected to Remain Stable in the USA Amid Steady Propylene Prices

The prices of Polypropylene are expected to remain stable for the upcoming week since the prices of feedstock polymer grade propylene have been stable for the past month and the demand also appears to maintain the current levels. The prices of Polypropylene were assessed at USD 2580 per tonne for PP Copolymer Injection Molding grade, and USD 2495 per tonne for PP Homopolymer Injection Molding grade in the first of week of November. The prices for both the grades have not changed much this month and the prices are expected to remain stable for the upcoming week also.

The prices of polymer grade propylene were assessed at USD 1630 per tonne in the first week of November. The prices of polymer grade propylene have also maintained a stable trend. The demand for Polypropylene is also buoyant and is able to match the supply hence the prices will tend to stabilize around the current levels.

Polypropylene is a thermoplastic and is a colourless solid with a glossy surface. Polypropylene has good resistance to acids, alkalis, inorganic chemicals. It is high impact strength, high softening point, and better stress cracking. Polypropylene has major application in packaging, fibres, and automotive parts. Polypropylene can be extruded for pipes, conduit, wire, and cables. The global Polypropylene demand stood at around 90 million tonnes in 2020 and is expected to grow at a healthy rate of 5.6% in the coming years till 2030.

As per ChemAnalyst, “the prices of Polypropylene are expected to remain flat in the upcoming week since the prices of feedstock propylene are also following a flat trajectory in the USA. The demand for Polypropylene is rising in the USA due to the rising demand of rigid packaging and construction and automotive sectors”

USA’s Phillips 66 Plans Starting Restoration of its shut Alliance, Louisiana Refinery

USA-based multinational, refiner and energy producer, Phillips 66, has planned to commence repair works at its storm-hit two units at Alliance, Louisiana refinery, that had remained shut after the landfall made by Ida in late August.

The repair activity, set to begin in January 2022, will be covering a 250,000-bpd day crude distillation unit, a 120,000-bpd fluidic catalytic cracking unit for gasoline production, a 33,000-bpd reformer, and a 70,000-bpd diesel hydrotreater. In addition, the damaged electrical system will also be put under repair to enable the power supply to all the equipment.

The Alliance refinery is an attractive midstream asset that receives pipeline transported domestic crude oil from the Gulf of Mexico and U.S. light oil is supplied to it by marine transport. The Louisiana Offshore Oil Port enables the transport of foreign crude oil through a pipeline to the Alliance refinery. The company has opened doors to the sale of the refinery post-repair or might consider closing it.

Crude oil is a hydrocarbon-rich liquid extracted from underground reservoirs through the drilling process. On transportation to the refineries, crude oil is subjected to thermal cracking in hot furnaces, and then undergo further processing which transforms it into several important petroleum products like diesel, gasoline, kerosene, LPG, jet fuel etc, petroleum naphtha, and vital petrochemical feedstocks i.e., ethylene and propylene which form the building block for many industrially important petrochemical products.

As per ChemAnalyst, despite the scheduled restoration of the Phillips 66 Louisiana refinery, its future looks uncertain. The company’s pending decision on the refinery’s future has instilled anxiety among the employees towards their job security, simultaneously creating pressure over the future crude market fundamentals. As the USA is already suffering from turbulence in the market from the escalating crude oil prices, the maximum utilization of the country’s installed capacities is most required at this time to bring stabilization in crude oil supply to the downstream sectors and cool off the rising crude oil prices.

Weak Demand to Drive Down the Crude Oil Market Futures Resulting in Stagnant Shipment Activity

The demand for crude oil in major consuming regions, China and India, demonstrated weak demand in quarter-three of 2021, causing the Organization of the Petroleum Exporting Countries (OPEC) to revise its crude oil market forecast for 2021 to a reduced value of 96.4 million barrels per day.

The reasons identified by OPEC for sluggish demand in these countries primarily includes the ongoing energy crisis that has led to the slowdown of the economies. In addition to the unrelenting energy crunch, China also witnessed the squelching of the property sector in the third quarter that further crippled the country’s economy. While in India, the post-COVID19 pandemic recovery dawdled due to decreased workforce, low operating efficiencies and disrupted supply-chain network.

Crude Oil is a hydrocarbon composed fuel that is extracted by drilling from the natural reservoirs deep down the earth. Crude oil plays a highly significant role in the economic development of any country owing to its application in fuelling transport, generating electricity, and providing feedstocks for the burgeoning plastics industry, pharmaceuticals and agricultural sector.

As per the chemical market analysis by ChemAnalyst, the bearish crude oil market fundamentals in these countries are expected to linger in the fourth quarter of 2021 as well, thus signalling muted arbitrage across these major crude oil-importing regions. The global seaborne trade volumes from the exporting countries are expected to decline considerably causing the freight rates of oil tankers to decline, eventually leading both the producer and the shipment owners to lose profitability. This may cause overcapacity in the countries indulging in heavy oil exports thereby causing crude oil prices to slump down in these regions.

However, the oil tanker shipment is expected to regain activity in the second quarter of 2022 with the increase in crude oil demand backed by the wearing-off of the effect of COVID19 disruptions and the reversal of energy shortage trends. OPEC anticipates the crude oil demand to rise to 100.6 million per day in 2022.

Orlen Poludnie Brings Europe’s Largest Green Propylene Glycol Production Plant On-Stream

Poland’s leading refiner Orlen Poludnie, from the parent organisation PKN Orlen group, has commissioned a USD 100 million green propylene glycol production plant at the Trzebinia biorefinery. The unit is touted to be Europe’s largest and Poland’s first green propylene glycol manufacturing facility with 30,000 tonnes annual capacity which is 10,000 more than the only other plant of this kind in Belgium.

The plant shall cater to 75% of the domestic demand thereby adding USD 12.6 million to the company’s yearly EBITDA. The production complex that also houses Poland’s first hydrogen hub fortifies Poland’s resolute to reduce carbon emissions in Southern Poland. The new plant which began construction in the second half of 2019, has also contributed to providing jobs to a workforce of 670 people after its completion.

The green propylene glycol is a vital bio-based product that is typically used as a food additive for locking moisture and dissolving added colours and flavours. It is also used as a solvent in the medicine and cosmetics industries due to its low toxicity. The aviation sector utilizes propylene glycol as a de-icing agent.

As per ChemAnalyst, the bio-based propylene glycol demand has been at its high in the European region owing to its environmental friendliness. The project is expected to bring Orlen Porludnie to the forefront of the fast-growing biorefinery sector also strengthening its market competitiveness across the globe. The project will also play an integral role in establishing sustainability in the refinery sector.

Denial of RoDTEP Creates a Stir in Chemical Industry, Indian Chemical Council Appeals Reconsideration from the Government of India

India’s chemical industry representative body, the Indian Chemical Council (ICC), which focusses on the industry’s growth, promotion and policymaking, has ushered in filing an appeal to the Government of India (GoI) to consider the inclusion of chemical products under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme while highlighting the adversities being borne by the chemical industry on RoDTEP denial.

The appeal by ICC has been submitted to the Department of Chemicals & Petrochemicals, Ministry of Chemicals & Fertilizers, GoI, following the release of a product-wise rate list by GoI via notification number 19/2015-2020 dated August 17, 2021, which reveals government’s refrain from the allocation of RoDTEP rates to chemicals and allied products.

RoDTEP reform, which has been introduced in lieu of the Merchandise Exports from India Scheme (MEIS), is a WTO compliant scheme devised to promote India’s exports and market competitiveness by benefitting exporters with refunds on previously non-recoverable embedded taxes (like fuel tax, electricity duty, Mandi tax etc.) at the local, state and central levels. The scheme was brought into effect on January 1, 2021.

The non-availability of RoDTES rates for Indian Chemical exporters for over 7 months is tarnishing their global competitiveness and has led to degrowth in exports amounting to a value of 49,327 crores that compounds to 17% of the total chemical exports. With its written appeal that now contains the HS Code wise list of affected chemical products, ICC seeks a resolve in the form of release of RoDTES rates for chemicals and its allied products that fall under Chapters 27, 28 – Inorganic Chemicals (like carbon black, hydrogen, phosphoric acid etc.), Chapter 29 – Organic Chemicals (like ethylene, benzene, vitamin B12 etc.), Chapter 30 – Pharmaceuticals (liquid extracts of liver, vaccines for hepatitis etc.), and Chapter 31 – Fertilizers (like ammonium nitrate, potassium sulphate etc.).

As per ChemAnalyst, the Indian chemical industry is already witnessing back-to-back hindrances in its export since last year, initially due to severe disruption in supply chain networks and loss of workforce during the COVID19 spread, followed by shortage of intermediates predominantly imported from China due to escalating freight charges with heavy port congestions this year. The RoDTES scheme represents a hope to save the chemical exporters from paying more under the cascading effect and reducing the gross production cost, thus giving the manufacturers more room to sell their products across the world. The reform, in these testing times, could give the required impetus to the industry in rebounding the export rates and strengthening their position in the international markets, consequently fortifying the Indian economy. The improvement in the exports would also cater to the rising demand for ammonium nitrate and other chemical products across the globe.