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This week's world news

The world this week

20 July 2009 00:00  [Source: ICB]

TOUGHER ANTITERRORISM MEASURES TO BE DELAYED
US Senate approval of a one-year extension to existing rules for antiterrorism security at 7,000 chemical facilities ensures that tougher site security legislation will be delayed until 2010. The existing regulatory program, the Chemical Facility Anti-Terrorism Standards, was due to expire at the end of the US government’s 2009 fiscal year on September 30.

AMMONIA PLANT FIRE
A fire at Russian producer Azot Berezniki’s ammonia facility last Tuesday caused limited damage and was contained within one hour, the Perm region’s emergency services department said. The fire was caused by a pipe leak and there were no casualties. The company did not comment on how ammonia output would be affected.

CROPENERGIES RESULTS
German biofuels company CropEnergies reported a net loss of €2.59m ($3.60m) in its fiscal first quarter (Q1), a fall from net earnings of €3.04m in the same period last year. This was largely due to one-off plant start-up costs. Revenues rose by 58% to €88.96m from €56.43m in Q1 last year, despite lower bioethanol prices. This was mainly due to the considerably higher volume of bioethanol sold, the company said. CropEnergies recorded an operating loss of €3.21m in the quarter ending May 31, compared with a profit of €5.48m in the same three months of 2008 – mainly due to start-up costs at its bioethanol plant
in Wanze.

WORLD’S LARGEST COAL-TO-OLEFINS FACILITY
China’s state-owned Shenhua Ningxia Coal Industrial Group expects to bring on stream the world’s biggest coal-to-olefins plant next year. "The methanol-to-propylene unit will start a trial run in April and the gasification unit will be commissioned around three months later," the company said. The plant will be able to yield 520,000 tonnes/year of polypropylene (PP) from coal. It will also be able to produce 184,800 tonnes/year of gasoline, 40,000 tonnes/year of liquid fuel and 13,800 tonnes/year of sulfur. Construction of the yuan 17bn ($2.5bn) project, located at Ningdong in Northwest China’s Ningxia province, started in late 2005.

NABUCCO GETS GO AHEAD
EU governments and Turkey have signed a long-awaited natural gas transit agreement for the proposed Nabucco pipeline. The €7.9bn ($10.9bn) project, backed by the EU and the US as a means of reducing Europe’s overreliance on unstable Russian gas supplies, should supply Europe with gas from the Caspian Sea region and the Middle East. Transit countries Turkey, Bulgaria, Romania, Hungary and Austria signed the accord after years of delay.

AN END TO LME OPEN OUTCRY PLASTICS TRADING?
The London Metal Exchange (LME) looked set to accept advice from its members to cease open outcry or "ring trading" of plastics futures last week. It proposed the change to focus on its inter-member electronic trading platform, LME Select, and the inter-dealer telephone market. Trading on the global and regional contracts has been thin since launch and dropped sharply last year, although it has concentrated on the North America contracts for linear low density polyethylene (LLDPE) and polypropylene (PP). The LME’s management were due to vote on July 17.

BIODIESEL PRESSURES
Polish oil firm PKN Orlen fears it may not be able to find enough cost-effective suppliers to meet its biodiesel component needs for 2010. This year, the Polish Biofuels Act requires that at least 4.6% of the firm’s total sold fuel output is biofuel, but next year, the requirement will be 5.75%.

CARTEL FINE ADJUSTED
The European Court of Justice has reduced a fine for US agricultural products major Archer Daniels Midland by €10m ($14m), ruling that it should not have been classified a "leader" in a citric acid cartel, the court said on July 10. The court cut the fine to €29.4m, siding with ADM after it had appealed against an adverse ruling in 2006 by the European Court of First Instance. The case dates back to a 2001 European Commission ruling to fine five firms, including ADM, more than €135m for participating in a 1990s cartel to allocate sales quotas and fix prices in the citric acid market.

NKNKH SEES SALES DROP
Russian petrochemical producer Nizhnekamskneftekhim (NKNKh) has reported an 11.5% year-on-year drop in sales for the first half of 2009 to rouble (Rb) 24.89bn (€546m, $761m). Sales in June were Rb4.58bn, down 6.7% year on year.

SERBIA’S HIP AZOTARA TO RECEIVE STATE RESCUE
A Serbian government rescue plan for state fertilizer producer HIP Azotara will allow it to resume production on August 1, following a shutdown that has lasted since May 2008. The plan involved the state covering €55m of HIP Azotara’s debts of €96m that are owed to state banks, in return for 81.6% of the company being transferred to state-owned gas utility Serbijagas.

CHINA PTA UNIT RETARTS
China’s BP Zhuhai restarted its 500,000 tonne/year purified terephthalic acid (PTA) unit in southern China on July 10, having shut it in May. The plant was taken offline for mechanical repairs and is now running normally. Some market players believed that the shutdown was due to a shortage of the feedstock and uncertain market trends.

COMPLEX IS APPROVED
The Chinese government has approved a joint venture between Saudi Arabian chemical giant SABIC and state-owned oil and petrochemical company Sinopec that is building a $3bn (€2.2bn) petrochemical complex in Tianjin, China. The site, with a capacity of 3.2m tonnes/year, including 1m tonnes/year of ethylene, is slated for completion in September.

INEOS OBJECTS TO PLANS
UK chemical firm INEOS wants Dutch polyolefins producer LyondellBasell Industries to cancel demolition plans in Chocolate Bayou, US, and sell it the high density polyethylene (HDPE) plant at the site. INEOS made a filing in bankruptcy court as part of an objection against LyondellBasell’s plans to cease HDPE output at the site by September 30. LyondellBasell is to shut down olefins operations at Chocolate Bayou, also attracting objections. INEOS claims the plans violate a 1988 agreement between the firms, when what is now LyondellBasell acquired the site, under which INEOS has an option to buy the plant if it has been shut for six months.

SAFCO PROFITS FALL
Saudi Arabian Fertilizer (SAFCO), a subsidiary of Saudi chemical giant SABIC, reported a 60% year-on-year drop in second-quarter (Q2) net profit to Saudi riyals (SR) 480m ($128m). This was a 9% fall from SR525m in Q1. Operating profit during the period fell by 48% to SR875m.

TECHNIP WINS CONTRACTS
French engineering firm Technip has won two major contracts for a 400,000 bbl/day grassroots refinery planned at Al-Jubail, in Saudi Arabia. The refinery – a joint venture between state oil company Saudi Aramco and French oil major Total – would also produce 700,000 tonnes/year of paraxylene (PX), 140,000 tonnes/year of benzene and 200,000 tonnes/year of polymer grade propylene from 2013.

PRIME POLYMER IS EYEING A CAPACITY INCREASE
Japanese producer Prime Polymer, a joint venture between compatriots Mitsui Chemicals and oil company Idemitsu Kosan, is considering raising its capacity for metallocene straight-chain low density polyethylene (LDPE) in Ichihara by one-quarter, to 300,000 tonnes/year. No time frame was given.

BASELL LOOKS TO END ITS PP MARKETING AGREEMENT
Dutch polyolefin producer LyondellBasell Industries’ subsidiary Basell has notified polypropylene (PP) customers that it is to end its role as the exclusive marketer for resin produced at US oil company ConocoPhillips’ Linden plant in New Jersey, said one buyer. Basell plans to suspend the agreement on December 31, which will allow ConocoPhillips time to make other arrangements, according to a motion filed on July 8 with the New York Southern District Bankruptcy Court.

DOW CHEMICAL FACES ETHYL ACRYLATE LAWSUIT
Attorneys filed a class-action lawsuit against US-based Dow Chemical last Monday seeking compensatory damages for residents near the site of an ethyl acrylate (ethyl-A) release at the company’s St. Charles Operations in Hahnville, Louisiana, US. The action alleges that negligence on Dow’s part led to a release of ethyl-A from a storage tank, causing "physical, property, financial and psychological damage" to nearby residents.

US CHEMICAL MARKET STABLE BUT NOT WELL
While second-quarter (Q2)earnings for US chemical companies will probably show improvement over Q1, continued weakness in key markets remains a concern, Wall Street analysts said last week. "The patient has stabilized but is still very sick," said Citigroup analyst PJ Juvekar in a research note. "End-market demand has sequentially improved from massive destocking in Q1, but Q2 should nevertheless be tough for our chemical universe," he added. The analyst said he expects earnings for diversified chemical companies DuPont and PPG Industries, both US, to decline by 45-55% year on year, while Dow Chemical will likely post red ink.

EXXONMOBIL TO INVEST $600M IN ALGAE BIOFUELS
ExxonMobil plans to invest $600m (€432m) to research and develop next-generation biofuels that will use algae as a feedstock. The company plans to form an alliance with Synthetic Genomics (SGI), a California-based research firm specializing in the development of genomic-driven technologies. According to SGI, algae in their natural state can efficiently use sunlight to convert carbon dioxide (CO2) into cellular oils and hydrocarbons, but not at the rates needed for large-scale production of biofuels. SGI believes it can produce the technology needed to extract sufficient quantities of biofuels using synthetic genomics and genome engineering.

INEOS EXPECTS TO AGREE TO NEW DEBT COVENANT
INEOS has reached an agreement with its senior lenders on a package of amendments to the group's financing arrangements, including a reset of the company's financial covenants. The UK-headquartered chemical group said proposals on €7.3bn ($10.3bn) of debt, which required approval by two-thirds of the 230-strong banking consortium, had been agreed by over 96% of its lenders. "I am grateful for the strong support of our investors through this process. The covenant reset provides the necessary headroom and flexibility to progress our current strategy," said Jim Ratcliffe, INEOS chairman. The company said its five-year business plan had been reviewed in great detail and "stress-tested."

CHINA TO PERFORM BETTER
China, the world's third-biggest economy, is on a clear recovery path and appears poised for stronger growth in the second half of the year, thanks to the government's heavy spending, economists said last week. The country did not disappoint in the second quarter (Q2) with a 7.9% annual GDP growth, which represented a strong rebound from a record low 6.1% growth in Q1, largely due to its massive yuan 4 trillion ($586bn) fiscal stimulus package. The government started implementing a host of fiscal measures to boost consumption this year. The strong Q2 numbers assuaged economists' doubts that China can achieve a full-year growth of 8%, which was initially deemed too ambitious a target.

YANSAB TO EXPORT PE, PP BY END OF AUGUST
Saudi Arabia’s Yanbu National Petrochemical (YANSAB) is set to export polyethylene (PE) and polypropylene (PP) from its new facility at Yanbu by the end of August or early September. "The PE and PP plants are expected to achieve commercial production by early August, after which the company will start building inventory ahead of exports," a source close to the company said. The company has already begun trial runs at its new 1.3m tonne/year cracker and downstream plants. The complex includes a high density polyethylene (HDPE) plant, a linear low density polyethylene (LDPE) unit, as well as a PP plant, each with a capacity of 400,000 tonnes/year.

BRASKEM VENEZUELA PROJECTS ARE DELAYED
Despite persistent local reports suggesting long-term delays are inevitable, Braskem said last week that its Venezuela projects were advancing and only slightly behind their original schedules. "Propilsur is well in the basic-design phase and Polimerica is conducting the front-end engineering design packages with the providers of the technology for the polyethylene [PE] plant [and is] therefore, according to plan," said Braskem spokesman Nelson Letaif. Braskem intends to build a 450,000 tonne/year polypropylene (PP) unit in Venezuela with Propilsur, and a 1.3m tonne/year ethylene unit intended mainly for PE production.

UNION SUES LYONDELL OVER PAY DISPUTE IN US
The United Steelworkers (USW) union has sued Lyondell Chemical in bankruptcy court, alleging that it owes workers severance pay, after the company shut down an ethylene glycol (EG) plant in Beaumont, Texas. Lyondell and the other US operations of Dutch polyolefins producer LyondellBasell Industries filed for bankruptcy protection in January. Lyondell laid off the union members on April 6, paying none of them severance benefits, the USW said. As such, the company broke its labor agreement, the USW alleged, and the union wants to arbitrate the pay dispute. Lyondell refused, the union said.

VENEZUELA LAW MAY HURT FUTURE INVESTMENTS
Joint-venture partners in Venezuela's petrochemical sector insist a law imposed by President Hugo Chavez's government, which raises state stakes in chemical ventures will not affect operations, but analysts have cautioned that the move could dampen further much-needed investment. "Without any doubt, the approval of this law is a big change in the Venezuelan petrochemical legal framework," said Carlos Bellorin, an analyst at IHS specializing in energy law. "Supposing that the existing projects are unaffected, the mandatory participation of the state and control of new petrochemical projects make Venezuela less attractive to petrochemical foreign capital."

TWO KILLED, SIX INJURED IN TOTAL, FRANCE EXPLOSION
An explosion at Total's Carling-Saint Avoid site in France killed two people and injured six, the French energy giant said last Wednesday. The blast occurred when a steam cracker at the facility exploded during a restart of the unit. The unit had been shut due to recent bad weather. Rescue workers were still searching late on Wednesday for debris and other possible victims, Reuters reported. Polyethylene (PE) and polystyrene (PS) are produced at the facility, which is also the location of a 320,000 tonne/year ethylene plant.

POLAND'S ZAT, UNION, DIFFER OVER JOB LOSSES
Union leaders have demanded an "end to chaotic job losses" at Polish fertilizer producer Zaklady Azotowe Tarnow (ZAT), the Polish Trade Union of the Workers' Movement (ZZPRC) said last week. Production difficulties and anxiety among the workforce had been caused by an ill-considered job reduction program, added ZZPRC. A petition has been handed to ZAT's management on the issue, it said. ZAT responded that the program had been implemented in cooperation with a consultancy that specializes in workforce restructuring. The workforce had been reduced by 177 to 2,200 through a program of voluntary redundancies, it said.

SASOL SIGNS JV DEAL FOR UZBEK GTL PROJECT
South African energy and petrochemical major Sasol has signed a joint-venture (JV) agreement to build a gas-to-liquids (GTL) project in Uzbekistan. Following a feasibility study, the JV with state-owned oil and gas companies Uzbekneftegaz, of Uzbekistan, and Petronas, of Malaysia, will build a 1.3m tonne/year GTL plant to produce diesel, kerosene, naphtha and liquefied petroleum gas (LPG). Financial terms and timelines were not disclosed.

UNIPETROL RENAMED ORLEN CESKA REPUBLIKA
Czech petrochemical producer and refiner Unipetrol is to be renamed Orlen Ceska Republika, its Polish majority stakeholder, PKN Orlen, says. In a corporate rebranding exercise, Orlen's wholly owned Lithuanian refiner, Mazeikiu Nafta, will also be renamed, becoming Orlen Lietuva.

SIPCHEM AND HANWHA INVEST $90M IN AL-JUBAIL
Saudi International Petrochemical (Sipchem) and South Korea's Hanwha Chemical have so far jointly invested $90m (€65m) in their new petrochemical project at Al-Jubail, Saudi Arabia, a source from Hanwha Chemical said. "We will get 40% share of the EVA [ethylene vinyl acetate] product sales, with the remaining 60% going to Sipchem," the official said. The new venture includes a 200,000 tonne/year EVA plant and a 125,000 tonne/year plant for polyvinyl products. The plants, 75% owned by Sipchem and 25% by Hanwha, are expected to come on stream by in 2013.

BLAST AT CHINA'S HENAN LUORAN CO KILLS SEVEN
A blast at China's Henan Luoran has killed seven workers and injured more than 100 people in the neighborhood. The explosion occurred at the firm's chlorobenzene tank in the early hours of the morning. The reason for the blast is being investigated, a local government source said.


By: Will Beacham
+44 20 8652 3214



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