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Saudi Arabia's Petro Rabigh Q2 net income surges on higher
      refining margins
Saudi Arabia’s Petro Rabigh Q2 net income surges on higher refining margins
SINGAPORE (ICIS)–Petro Rabigh’s net profit surged by 93.2% year on year in the second quarter on the back of higher refining margins, the Saudi Arabia-based producer said. Saudi riyal (SR) million Q2 2022 Q2 2021 % change  H1 2022 H1 2021 % change  Sales 18,100 11,109 62.9% 32,502 21,245 53.0% Operational profit 1,547 1,014 52.6% 2,625 1,960 33.9% Net profit 1,385 717 93.2% 2,109 1,366 54.4% Favourable market conditions for refined products supported the company’s earnings in the second quarter and the first half of the year, driven by the increase in crude oil prices which led to improved margins, the company said in a filing to the Saudi bourse Tadawul on 11 August. The company’s second-quarter net profit was also boosted by a non-recurring gain from an early settlement of long-term loans, which amounted to SR236.3m. Petro Rabigh processes some 400,000 bbl/day of crude oil into refined products such as gasoline and naphtha at its integrated refinery and petrochemical complex in Rabigh, according to the company’s website. The company has 1.6m tonnes/year of ethylene production capacity at its Rabigh complex, according to the ICIS Supply & Demand Database. ($1 = SR3.75) Thumbnail image: Jiddah, Saudi Arabia – 14 December 2020 (By Amr Nabil/AP/Shutterstock) Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets.
US economy to face headwinds in H2, but chance of soft
      landing remain - economist
US economy to face headwinds in H2, but chance of soft landing remain – economist
HOUSTON (ICIS)–The US economy will continue to face headwinds in the second half of the year from high inflation, but consultancy Oxford Economics still anticipates a soft landing amid a strong labour market and continued spending from US consumers. Oxford’s lead US economist Oren Klachkin and senior economist Ahmed Abdelmeguid made their comments on the US economic outlook during a webinar on Thursday. Klachkin said that despite the two consecutive quarters of contraction of the country’s gross domestic product (GDP), which is one technical definition of a recession, Oxford does not see the US falling into a recession and anticipates a relatively modest rebound in economic activity in the second half of 2022. A soft landing, in economics, is a cyclical slowdown in economic growth that avoids recession. “The key component that we think will keep the US out of a recession is the fact that the labour market remains very strong,” Klachkin said. “This means that the income gains that are being generated from this jobs market will continue to offer support for consumer spending amid the environment of high inflation and higher interest rates.” The economist sees full-year 2022 GDP expanding at 1.7%, softening to about 1% for 2023. Klachkin said one negative data point he is continuing to focus on is the labour force participation rate, which fell to 62.1%, near its level at the end of 2021. “We do think that labour demand will soften a bit in the second half of 2022 as companies face higher costs and if consumer spending softens,” Klachkin said. Klachkin said consumers are continuing to spend but at a slower rate. Overall nominal spending was up 1.1% in June, he said, but only by 0.1% once the impact of inflation was removed. One outcome of the trend is that consumers are beginning to reach into their savings to help sustain spending amid the inflation. “As of now we do not see a high risk of a sharp pullback in consumer spending in the second half of 2022,” he said, adding that he sees signs that the economy may have moved past peak inflation. “I do not want to be too optimistic on the inflation front as there is a lot of uncertainty about this right now,” Klachkin said, pointing to the July Consumer Price Index (CPI), which came in lower than expected. He said he does think inflation could linger higher for longer and is forecasting 8.1% CPI for the year and core inflation at 6.2%. Klachkin said they see the US Federal Reserve continuing to raise interest rates, but maybe being less aggressive. “We see another 75 basis-point hike in September,” he said. “And then after that we actually see a series of 25 basis-point hikes before we see rate cuts in 2023 to help support the economy as economic activity softens on the supply chain front.” SUPPLY CHAINS The economist said that a slowing of the economy could actually be good for supply chains, which have been strained amid the surging demand. “The fact that the economy is a bit softer now is actually good for supply chains because it allows basically for the supply side of the economy to catch up to overall activity in the demand side of the economy,” he said. Looking at industry, Abdelmeguid said that business activity has remained healthy. “However, while the demand for new orders has declined, business activity has remained healthy and although production has slowed, orders are being filled more quickly, which has allowed certain industries to meet demand more quickly than they would have done in earlier in the post pandemic period,” Abdelmeguid said. He said industries that were hit particularly hard, like the auto industry, should be able to maintain current production levels as they rebuild inventories. “The only exception will be those industries that face pressures from rising cost of energy,” he cautioned.
PODCAST: Asian olefins producers challenged to preserve
      margins in H2 - ICIS analysts
PODCAST: Asian olefins producers challenged to preserve margins in H2 – ICIS analysts
LONDON (ICIS)–Asian olefins capacity is set to increase in the coming months, but against the prospect of a global recession and challenging demand it is unclear how this will develop for producers. Senior analysts Amy Yu and Joey Zhou talk to European Senior Reporter Morgan Condon about the main drivers in the market for the rest of 2022. All prices discussed in the podcast refer to the US dollar. For more information visit our Price Forecasts | Provided by ICIS.
Braskem Idesa to start construction of Mexico ethane terminal
      in Q3
Braskem Idesa to start construction of Mexico ethane terminal in Q3
HOUSTON (ICIS)–Braskem Idesa plans to start construction of a Mexican ethane terminal in the third quarter, with completion expected in the second half of 2024, Brazilian partner of the joint venture said late on Wednesday. The terminal will be able to import 80,000 bbl/day, and its start-up will allow Braskem Idesa to rely on exports for all of the feedstock it needs to run its ethane cracker, Braskem said. In fact, the terminal will provide Braskem Idesa with 120% of the ethane needed for its operations. As such, it should allow the joint venture to expand PE production by about 15%, Braskem said. Fixed costs related to the terminal will run $150-200/tonne, with the costs falling as the level of imports rise, the company said. The terminal should cost $400m, Braskem said. The Netherlands-based engineering services provider Advario will hold a 50% stake in the terminal. The terminal will serve Ethylene XXI, Braskem Idesa’s integrated polyethylene (PE) complex in Coatzacoalcos, Mexico. The Braskem Idesa cracker in Coatzacoalcos has 1.05m tonnes/year of ethylene capacity and downstream capacities of 750,000 tonnes/year of high density PE (HDPE) and 300,000 tonnes/year of low density PE (LDPE). Braskem Idesa is a joint venture made up of Braskem (75%) and Mexican chemical producer Grupo Idesa (25%). Braskem Idesa had built Ethylene XXI with the expectations that it would receive all of its feedstock domestically. However, a chronic decline in oil production has caused Mexico’s surplus of ethane to turn into a deficit. As a result, Pemex failed to supply Braskem Idesa with enough ethane under the terms of its contract. Braskem Idesa offset a portion of the shortfall by importing ethane from the US and relying on trucks to deliver the feedstock from a Mexican port to the complex. Braskem Idesa and Pemex had since amended the ethane supply contract. Under the new terms, Pemex agreed to supply Braskem Idesa with a minimum of 30,000 bbl/day of ethane. During the fourth and first quarters, Pemex had exceeded its contract volumes, Braskem said. But during the second quarter, Pemex failed to fulfil its obligations and supplied Braskem Idesa with only 22,100 bbl/day. The shortfall was most pronounced in April and May, and Braskem attributed it to problems Pemex had with natural-gas processing. There was some recovery in June, and Braskem expects Pemex will return ethane shipments to their contract levels. Additional reporting by Jonathan Lopez Thumbnail shows PE, which can be made with ethane. Image by Al Greenwood.
Germany’s energy-intensive producers fear €11bn cost from
      natgas levy
Germany’s energy-intensive producers fear €11bn cost from natgas levy
LONDON (ICIS)–Germany’s chemical and other energy-intensive industrial producers could face more than €11bn/year in additional costs from the levy on natural gas consumption (“Gasumlage”) that will take effect in October, officials said on Thursday. The €11bn translates into an additional burden of €13,000 for each job in the chemicals, steel, gas, paper, building materials and metals industries. “Energy-intensive industries are very concerned about their future in Germany,” chemical producers’ trade group VCI and other groups said in a joint statement. “Producers depend on affordable energy for their international competitiveness,” they said. They also warned of an additional levy, a levy on gas storage (“Gasspeicherumlage”), also due to come into effect in October. “These multiple burdens pose a massive threat to energy-intensive companies in Germany,” said Jorg Rothermel, who heads VCI’s energy, climate protection and raw materials unit. Industry and private consumers were affected by the current acute energy price crisis, he said. “It is therefore important to relieve groups that are particularly affected, such as energy-intensive companies, through the federal budget, without additional burdens for private consumers,” he added. Gas consumers will have to pay the levy starting on 1 October 2022 until 1 April 2024, when it will expire. The levy will allow the government to raise funds to cover 90% of the additional costs gas importing power firms have incurred because of the shortfall in Russian gas supply. The supply shortfall has forced gas importers to buy replacement volumes on the market, at much higher prices, jeopardising their solvency. The exact amount of the levy has yet to be announced. Government officials previously indicated €0.015-0.05/kilowatt hour. Front page picture: The Chemiepark in Marl, in Germany’s North Rhine-Westphalia state Source: Hans Blossey/imageBROKER/Shutterstock
Low Rhine to hinder barge traffic, could affect production –
      BASF
Low Rhine to hinder barge traffic, could affect production – BASF
MADRID (ICIS)–Low water levels on the Rhine river in Germany are set to impede navigation for some barges in the coming days, while production could be affected at “individual” plants, German chemicals major BASF told ICIS on Thursday. The Rhine Waterways and Shipping Authority (WSA Rhein) also confirmed to ICIS on Thursday that the current low water levels could lead to fewer barges navigating the key petrochemicals and oil products waterway. Those barges able to navigate will need to do it at very low capacity, a situation that has been ongoing for some weeks already as Europe deals with the drought. Barges loaded at partial capacities sharply increase logistics costs for petrochemicals companies, which are forced to contract more barges for the same amount of material. EYE OF THE STORMBASF’s flagship Ludwigshafen site is located by the Rhine, and transport along the river is key for the company’s operations. A spokesperson for the company said water levels are expected to stay well below the 60cm considered safe for barges to navigate at the Kaub gauge measuring point in southwest Germany. Kaub is the shallowest part of the Rhine. “The mark of 60cm of the Rhine has been undercut at Kaub. Levels in the range of 35-55cm are forecast for the next two weeks. For the predicted levels, some types of ships can no longer be used and will stop sailing; all others will sail with reduced loads,” said the BASF spokesperson. “Currently, production is not affected by low water. However, we cannot completely rule out reductions in production rates at individual plants over the next few weeks.” It added that after the low levels on the Rhine in autumn 2018, which increased logistics costs for BASF sharply, the company has been “increasingly relying” on alternative modes of transport, especially rail. BASF also uses water from the river to cool its plants, but the record high temperatures recorded in many parts of Europe in July also threatened cooling activities. “Part of the package of measures [introduced after 2018’s drought] was also the expansion of our re-cooling capacities. In the event of a foreseeable phase of hot weather, appropriate adjustments will be made at the site,” the spokesperson said. “For example, re-cooling plants will be switched on to compensate for the lower volumes of water that can be taken from the Rhine. With measures such as the expansion and optimisation of the central re-cooling plants and the optimisation of the cooling water flows, we can prevent production interruptions during hot weather phases.” ‘UNFAVOURABLE SITUATION’A spokesperson for WSA Rhein said the current drought has come much earlier than usual, adding that the rain forecast is not favourable overall, with water levels predicted to fall even further in the coming days. “The current water levels are at an exceptionally low level for this time of year. For the next three-four days, water levels are predicted to fall another 10-15cm. The 14-day forecasts continue to point to a slight increase in water levels from the middle of next week,” said the spokesperson. “However, this is not significant: the water levels remain at a low level. Usual periods of low water last until September/October. This does not yet mean that this will also be the case in 2022, but the current starting situation is comparatively unfavourable.” The spokesperson added that barge loading capacities would depend on the size of the barge and that even in the 2018 drought, where even lower levels than the current ones were recorded, some barges could still navigate. “During the exceptionally low water levels in 2018, the lowest water level in Kaub was at 25cm (which is equivalent to a water depth of 1.37m) and some barges were still navigating,” it concluded. EUROPE PETROCHEMICALS ORDEALOther petrochemicals sources in Europe have also expressed dismay at the severity of the current crisis over Rhine navigation, with some predicting “disaster” in the coming weeks if water levels remain low or even fall further. According to Elwis, a consultancy that specialises in German waterways, water levels could fall to just over 30cm at Kaub by 15 August, a depth set to impede many barges’ navigation. Source: Elwis A source at a large producer said at 30cm “almost nothing” could navigate along the Rhine. Overall, sources are pessimistic about the gathering storm for petrochemicals in Europe: the crisis on the Rhine adds up to high energy and food prices, pushing inflation to multidecade highs, as well as potential natural gas supply curtailments from Russia in the coming months. “We are already hugely uncompetitive price-wise [in Europe, compared with other regions] and demand is shockingly low; now, fulfilment will become an issue along the Rhine,” said a source. “Everything is against European [petrochemicals] producers at the moment,” concluded another source. Map by Miguel Rodriguez-Fernandez Front page picture: The Rhine river in Dusseldorf on 10 August Source: Ying Tang/NurPhoto/Shutterstock  Focus article by Jonathan Lopez Additional reporting by Marta Fern, Nazif Nazmul, and Nel Weddle
VIDEO: China PE pipe grade demand to stay weak on tepid
      piping works
VIDEO: China PE pipe grade demand to stay weak on tepid piping works
SINGAPORE (ICIS)–Watch ICIS senior editor Hazel Goh discuss current developments in China’s polyethylene (PE) pipe grade black 100 market. Weak China demand dampens hopes of market recovery Implementation of government infrastructure projects slow Weak global economic outlook weighs on sentiment Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.
Indian Oil commissions first 2G ethanol plant in Panipat
Indian Oil commissions first 2G ethanol plant in Panipat
MUMBAI (ICIS)–Indian Oil Corp (IOC) began operations at its 100 kilolitres/day (Kl/day) second generation (2G) ethanol plant at Panipat in the northern Haryana state on 10 August. Built at a cost of over Indian rupee (Rs) 9bn ($113.4m), the ethanol plant is located near IOC’s Panipat refinery complex. Once fully operational, the plant is expected to produce around 30m litres of ethanol using 200,000 tonnes/year of paddy straw as feedstock. Commercial production at the plant is expected by December, and this should help India achieve its target of blending 20% ethanol with auto fuel by 2025. “Biofuel is the need of the hour as it will help reduce our dependency for fuel and energy on other countries,” Indian Prime Minister Narendra Modi said at the inauguration of IOC’s 2G plant. Twelve centres will be set up to collect feedstock paddy straws from fields in the vicinity of the plant site. This is also expected help address pollution being caused by the burning of these materials in northern India. “This is just the beginning as ethanol plants will be set up in different parts of the country. Pollution-causing stubble will be used to produce ethanol,” PM Modi said. State-run oil companies such as IOC, Bharat Petroleum Corp Ltd (BPCL), Hindustan Petroleum Corp Ltd (HPCL), Mangalore Refinery and Petrochemicals Ltd (MRPL) have announced plans to invest Rs100bn to set up a total of 12 2G ethanol plants across the country. HPCL is expected to set up four 2G ethanol plants, IOC and BPCL will set up three plants each, while MRPL and Numaligarh Refinery in Assam will set up one each. ($1 = Rs79.34)
Storage analysis: How much spot LNG will Japan and South
      Korea need this winter?
Storage analysis: How much spot LNG will Japan and South Korea need this winter?
The crucial pre-winter shoulder months of August, September and October will determine the level of storage fullness at which countries start the winter. ICIS estimates that Japan and South Korea bought a combined 5.5million tonnes of spot LNG during this period last year. China alone also bought 1.5 times that combined amount in 2021. However, China is unlikely to be vying for much spot in the coming months due to the high prices and slowing economy. ICIS Analytics forecast that Japan and South Korea combined are looking to secure slightly more than 5.0m tonnes of spot in August, September and October this year – assuming that there is not much flexibility or uplift available from their long-term contract suppliers. The spot amount is less than what was bought last year, but it is still nearly 80 cargoes of spot LNG just before winter. To secure these cargoes during the current gas shortage happening in Europe, the North Asia spot price – the ICIS EAX – will need to close the gap with the ICIS TTF European gas price. KOGAS will buy more spot pre-winter this year, compared to 2021, due to much higher summer storage withdrawal and a 90% storage requirement At the time of writing, Korean energy statistics provider KESIS has confirmed that South Korea’s storage inventory is around 1.8m tonnes. This is 0.9m tonnes lower than ICIS has modelled, which is estimated to be the ‘normal’ level of inventory for previous early Augusts. Also, the mandated 90% storage fullness by the end of October will mean that an additional 0.5m tonnes will be required to fill the gap compared to the ICIS base case at the same month. Consequently, using these numbers, ICIS Analytics predict that the country will seek to purchase 2.4m tonnes of spot this year, 0.3m tonnes more than the same period in 2021. Japan is expected to buy less spot LNG pre-winter this year compared to 2021, but the tight power grid may be a concern ICIS estimate that Japan’s storage inventory level should be at 4.9m tonnes at the time of writing. This is 26% higher than the past five-years average, just slightly below the record high for the same month in previous years. In fact, there are signs that a few storages could be hitting tank-top soon, creating logistical and storage management problem going into the winter. This is likely due to several factors, such as over-stocking the summer demand and the general sentiment to maintain a high level of storage, especially when transitioning into the 2H of the year. We expect companies to draw down another 0.6m tonnes in August as the country goes through its summer peak, followed by three months of gas input into the storage, well into November. ICIS Analytics forecast Japan to buy nearly 2.7m tonnes of spot LNG in the coming three months, 20% less than was bought in the same period last year. This will lead the country to a decent level of 4.9m tonnes by the end of October and 5.4m tonnes by November, just before the winter withdrawal season begins. Overall, we believe that the North Asia spot market will be tight in the coming pre-winter months, as South Korea and Japan will be looking for around 80 spot cargoes to reach these storage levels, competing with Europe. However, competition would have been even stronger if China was buying more LNG, but it is currently less active and being priced out of the spot market. ICIS LNG Edge market intelligence The ICIS LNG Edge market intelligence platform tracks cargoes in real-time around the world and uses satellite data to monitor the imports and exports of global consumers and producers. A dedicated team of analysts supplement this physical data with commercial information from customs agencies and other sources to add in-depth price and volume data to voyage records. The ICIS LNG Supply and Demand Forecast provides a rolling 24-month forward forecast of global trade, drawing on our historic data and analysis of future trends. ICIS LNG Edge also provides a database of global LNG contracts, an infrastructure database, news and alert services and more. The ICIS publication LNG Markets Daily contains the latest news as well as a full range of price assessments. Contact us: For more information on our ICIS LNG Edge data: https://www.icis.com/explore/contact/
Storage analysis: How much spot LNG will Japan and South
      Korea need this winter?
Storage analysis: How much spot LNG will Japan and South Korea need this winter?
The crucial pre-winter shoulder months of August, September and October will determine the level of storage fullness at which countries start the winter. ICIS estimates that Japan and South Korea bought a combined 5.5million tonnes of spot LNG during this period last year. China alone also bought 1.5 times that combined amount in 2021. However, China is unlikely to be vying for much spot in the coming months due to the high prices and slowing economy. ICIS Analytics forecast that Japan and South Korea combined are looking to secure slightly more than 5.0m tonnes of spot in August, September and October this year – assuming that there is not much flexibility or uplift available from their long-term contract suppliers. The spot amount is less than what was bought last year, but it is still nearly 80 cargoes of spot LNG just before winter. To secure these cargoes during the current gas shortage happening in Europe, the North Asia spot price – the ICIS EAX – will need to close the gap with the ICIS TTF European gas price. KOGAS will buy more spot pre-winter this year, compared to 2021, due to much higher summer storage withdrawal and a 90% storage requirement At the time of writing, Korean energy statistics provider KESIS has confirmed that South Korea’s storage inventory is around 1.8m tonnes. This is 0.9m tonnes lower than ICIS has modelled, which is estimated to be the ‘normal’ level of inventory for previous early Augusts. Also, the mandated 90% storage fullness by the end of October will mean that an additional 0.5m tonnes will be required to fill the gap compared to the ICIS base case at the same month. Consequently, using these numbers, ICIS Analytics predict that the country will seek to purchase 2.4m tonnes of spot this year, 0.3m tonnes more than the same period in 2021. Japan is expected to buy less spot LNG pre-winter this year compared to 2021, but the tight power grid may be a concern ICIS estimate that Japan’s storage inventory level should be at 4.9m tonnes at the time of writing. This is 26% higher than the past five-years average, just slightly below the record high for the same month in previous years. In fact, there are signs that a few storages could be hitting tank-top soon, creating logistical and storage management problem going into the winter. This is likely due to several factors, such as over-stocking the summer demand and the general sentiment to maintain a high level of storage, especially when transitioning into the 2H of the year. We expect companies to draw down another 0.6m tonnes in August as the country goes through its summer peak, followed by three months of gas input into the storage, well into November. ICIS Analytics forecast Japan to buy nearly 2.7m tonnes of spot LNG in the coming three months, 20% less than was bought in the same period last year. This will lead the country to a decent level of 4.9m tonnes by the end of October and 5.4m tonnes by November, just before the winter withdrawal season begins. Overall, we believe that the North Asia spot market will be tight in the coming pre-winter months, as South Korea and Japan will be looking for around 80 spot cargoes to reach these storage levels, competing with Europe. However, competition would have been even stronger if China was buying more LNG, but it is currently less active and being priced out of the spot market. ICIS LNG Edge market intelligence The ICIS LNG Edge market intelligence platform tracks cargoes in real-time around the world and uses satellite data to monitor the imports and exports of global consumers and producers. A dedicated team of analysts supplement this physical data with commercial information from customs agencies and other sources to add in-depth price and volume data to voyage records. The ICIS LNG Supply and Demand Forecast provides a rolling 24-month forward forecast of global trade, drawing on our historic data and analysis of future trends. ICIS LNG Edge also provides a database of global LNG contracts, an infrastructure database, news and alert services and more. The ICIS publication LNG Markets Daily contains the latest news as well as a full range of price assessments. Contact us: For more information on our ICIS LNG Edge data: https://www.icis.com/explore/contact/
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