Mesaieed Petrochemical Surges 400% on First Trading Day in Qatar

A staggering trading day for Qatar’s Mesaieed Petrochemicals points toward serious expectations for the company.  The trading price rose 400% in a single day, immediately after it had completed Qatar’s largest IPO in five years.

Mesaieed Petrochemical Holding rose more than five fold on its first day of trading after completing the country’s biggest initial public offering in five years.

The shares closed at 55 riyals after opening at 10 riyals on the Qatar Exchange. The stock rose as high as 73.9 riyals during the day.

State-run energy company Qatar Petroleum raised 3.2 billion riyals ($880 million) by selling a 26 percent stake in Mesaieed to Qatari nationals last month. The share sale is the nation’s biggest since Vodafone Qatar raised $1 billion in 2009, and the largest first-day gain for an IPO in the Middle East and Africa since 2009 when Saudi Arabia’s Ace Arabia Cooperative Insurance Co. (ACE) sold shares, according to data compiled by Bloomberg.

“The IPO was at 10 riyals which is a significant discount to what this company is worth,” Bobby Sarkar, head of research at Qatar National Bank Financial Services, said in a phone interview. “This is a solid petrochemical, QP-backed company.”

Mesaieed was formed in September and owns Qatar Chemical Co., Qatar Chemical Co. II and Qatar Vinyl. The government valued the company at 12 billion riyals for the IPO, below an initial valuation of 16.7 billion riyals, Finance Minister Ali Al Emadi said last month. Foreigners are allowed to trade in the company’s shares once they have been listed.

Mesaieed is the first company to be listed on the country’s bourse since MSCI Inc. (MSCI) agreed to upgrade Qatar to emerging-market status in June. It raises to 43 the number of companies traded on the Qatar Exchange, Chief Executive Officer Rashid al Mansoori said in an interview in Doha today.

By Robert Tuttle of Bloomberg

The full article is visible via the link below – Pankaj Oswal

http://www.bloomberg.com/news/2014-02-26/mesaieed-petrochemical-surges-400-on-first-trading-day-in-qatar.html

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Exxon starts world’s 1st crude-cracking petrochemical unit

ExxonMobil has made history in Singapore by being first to launch chemical unit that processes crude oil.  This will make a more direct process in taking crude  into petrochemicals; and this efficiency could see ExxonMobil streak ahead in the market.

ExxonMobil officially launched the world’s first chemical unit that processes crude oil in Singapore, aiming to lower costs to better compete with rivals in a market saddled with excess capacity.

Chemical companies typically process refined oil products such as naphtha – created by separating crude oil into lighter groups – at facilites called crackers to create petrochemicals like ethylene and propylene. These are further processed into products such as plastics, soaps or synthetic fibres.

But Exxon’s new cracker in Singapore allows the company to bypass the refining process by processing crude directly into petrochemicals.

“This is the right place to do crude cracking because it gives us an advantage over the predominant feedstock in the region,” ExxonMobil Chemical’s president Stephen Pryor told Reuters.

“The cracker we’ve built is by far the most feed flexible cracker we’ve ever built. It can crack anything from light gases to heavy liquids, including crude oil.”

The new technology helps reduce raw material costs, energy consumption and carbon emissions, Pryor said, while the cracker also produces fuel components.

He declined to detail the extent of Exxon’s savings or specify which crude grades are processed at the cracker. The cost of Brent crude is more than $160 a tonne lower than Asia’s naphtha NAF-1H-TYO, Reuters data showed.

Crackers in Asia typically use naphtha as a feedstock, while those in the Middle East enjoy a cost advantage as they process cheaper ethane and propane gases into petrochemicals.

The multi-billion dollar complex on Singapore’s Jurong Island includes the 1 million tonne per year (tpy) steam cracker as well as production of at least 1.4 million tpy of polymers and elastomers. The cracker was brought online in the middle of last year, but Exxon has not previously confirmed the use of crude as a feedstock.

The project had been delayed for two years due to its complexity and a weak economic outlook which has pared the use of petrochemicals in automobile parts, electrical appliances and consumables, despite excess capacity.

CHEMICAL DEMAND RISING

An improved economic outlook in the United States and better demand in China is expected to raise global chemical demand growth in coming years, according to the American Chemistry Council.

The Council sees headline global petrochemicals growth of 4.1 percent in 2014 and 4.5 percent in 2015, up from 2.1 percent last year, said Thomas Kevin Swift, its chief economist and managing director.

“After a couple of very slow years, we saw good demand growth in China last year,” said Pryor. “With China’s export sector picking up, we would expect that to continue.”

Global chemical demand for primary petrochemicals was expected to grow by about 50 percent over the next decade, with China accounting for half of the growth, he added.

To meet this demand, Exxon also planned to raise ethylene capacity at its joint venture with Saudi Aramco and Sinopec in southern China Fujian by 200,000 tonnes per year in 2015. At the Singapore plant, Exxon could also produce specialty petrochemicals such as butyl rubber for tyres and premium resins for adhesives, Pryor said.

Yet, supply from the United States could jump as petrochemical producers, including Exxon, launch projects to take advantage of cheap ethane gas from the shale resources boom. Exxon plans to build a 1.5 million tpy ethylene complex at Baytown, Texas by 2016.

“Demand will grow but it will be a competitive marketplace from a standpoint of capacity and that means that marginal liquid crackers are going to be under a lot of pressure,” Pryor said.

“You already see that in Europe, you see that in Japan and you’re going to see it throughout the region.”

French oil major Total and Ineos have said they will shut loss-making petrochemical plants in France and Scotland as Europe readies for a competitive assault from U.S. rivals armed with cheap feedstock.

By Florence Tan and Seng Li Peng of Reuters

The full article is visible via the link below – Pankaj Oswal

http://uk.reuters.com/article/2014/01/08/exxon-singapore-petrochemical-idUKL3N0KH2VU20140108

Crisis-hit Haldia Petrochemicals plans temporary shutdown

The problems for Haldia Petrochemicals continue to mount, this time due to a working capital shortfall.  According to industry sources, Haldia could complete a temporary shutdown for a week later in the month to save on other business costs.  The crisis has negatively impacted naphtha production and has resulted in a low plant load in the recent months.

KOLKATA: Haldia Petrochemicals is likely to opt for a temporary shutdown from the fourth week of this month following severe working capital crisis that is resulting in a shortage of naphtha and low plant load for the last few months.

It has been learnt that most of the technical officers of HPL, as well as shortlisted bidder Indian Oil, are not averse to the idea of a shutdown for a few weeks to cut down continuous losses and maintenance of the plant. HPL board will meet on December 17 for discussing the future course of action following the Supreme Court verdict that has allowed the Chatterjee Group to move to International Court in Paris for arbitration regarding the disputed 15.5 crore shares. This block constitutes 9.22% equity stake of the company and holds the key for management control.

HPL chairman Partha Chatterjee could not be contacted for comment, but managing director U K Basu said that there is no plan for a shutdown as of now.

According to sources, the HPL plant is now operating in less than 50% capacity which could be dangerous for the plant in the long run. The capacity of the plant is 260 tonnes per hour, but it is operating at 110-120 tonnes on average. “IOC is giving 1,000 tonnes naphtha per week. Not much naphtha has been lined up for the next few weeks. Besides, there has been no maintenance of the plant for the last 18 months,” said sources.

Sources pointed out that HPL is losing Rs 2-2.5 crore every day due to low-capacity operation. They said detonating financial condition is also forcing HPL to sell its products at discounts to realize funds quickly as the company could not hold inventory for long. “It is selling product without almost any margin forcing other petrochem players also to undercut price. This is not good for HPL as well as for the industry as a whole. IOC, the new owner in waiting, is also not happy with this as it is also facing the heat of price undercutting. If it continues for long, then HPL’s financial health will be beyond redemption,” alerted sources.

The firm had an accumulated loss of Rs 2,500 crore till March 2013. From April to October, 2013, HPL has posted a loss of Rs 521 crore taking the accumulated losses to over Rs 3,000 crore. The net worth of HPL has already eroded by Rs 50 crore. If the losses continue, then the company will have to go to BIFR.

The full article is visible via the link below – Pankaj Oswal

http://articles.timesofindia.indiatimes.com/2013-12-15/kolkata/45215153_1_chatterjee-group-hpl-plant-naphtha

RI’s growing petrochemical market lures foreign players

Mande Blog

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Raras Cahyafitri, The Jakarta Post, Jakarta | Business | Wed, December 11 2013, 11:58 AM

Thailand-based PTT Global Chemical Public Company Limited, the chemical flagship of the giant PTT Group, signed an agreement on Tuesday with state-owned PT Pertamina on a joint venture to develop a petrochemical complex in Plaju, South Sumatra.

Under the agreement, Pertamina will hold a 51 percent stake while PTT Global Chemical will have the remaining 49 percent.

“PTT Global Chemical may find another partner with the consent of Pertamina,” Pertamina director Chrisna Damayanto said after the signing of the agreement on Tuesday.

The companies will jointly develop the petrochemical complex on a 450-hectare-site in Plaju that will house, among other facilities, a naphtha cracker with a production capacity of 1 million tons per year, Chrisna said.

Meanwhile, according to Bowon Vongsinudom, PTT Global Chemical president and chief executive officer, the project is estimated to…

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US shale revolution puts squeeze on European chemicals groups

The recent rapid expansion of the US natural gas sector is edging European producers out of the market and forcing them to focus increasingly on speciality products to stay afloat.  With the cheaper US produce, European businesses and operations will have to be creative and focusing downstream.

The US shale gas revolution is forcing a redoubling of efforts by European chemical producers to move away from low-margin petrochemicals and focus on higher margin speciality products.

European petrochemical makers risk being squeezed between low-cost producers in the Middle East and a resurgent chemicals industry in the US, where feedstock and energy prices have plummeted following shale gas discoveries.

After a decade of almost zero capacity expansion in US petrochemicals, shale gas has prompted the likes of Dow Chemical, LyondellBasell, Chevron Phillips and ExxonMobil Chemical to invest billions of dollars in ethane cracker capacity on the US Gulf Coast.
Fresh US supplies of petrochemicals – primarily ethylene derivatives such as polyethylene and PVC – will hit global export markets in coming years. Meanwhile, Middle Eastern chemical companies that have long had a big feedstock and energy cost advantage over Europe may struggle to export to a more competitive US and seek European customers instead.

Environmental concerns and greater population density have so far prevented Europe developing its own shale gas reserves, which threatens to leave European chemical producers at a competitive disadvantage in the near term. Natural gas prices in the US are roughly a third of the Europe price.

In Europe, petrochemical companies tend to run costly, crude oil-derived naphtha crackers. Although some economists believe that crude oil and natural gas spreads will eventually narrow, US companies are cashing in.

Bernstein Research estimates that the combination of high oil prices and cheap gas has boosted the profits of US chemical companies running ethane crackers by an annual $6bn, or roughly 14 per cent of the entire US industry’s profits in 2011.

Paul Hodges, chairman of industry consultancy International eChem, says there is “a real fight to the death going on in core [petrochemical] export markets such as PVC between US and European producers”.

“US producers have grasped they have a cost advantage, and being good Americans they are running as hard as possible with it.”

Standard & Poor’s says European producers would “need to respond to this change in industry dynamics with a range of decisive measures aimed at improving production efficiency and improving their cost positions”.

Belgian-based Solvay is dealing with US competition and weak demand in Europe’s polyvinyl chloride (PVC) market by folding its PVC assets into a joint venture with those of rival Ineos. Solvay plans to exit the agreement in a few years.

Jean-Pierre Clamadieu, Solvay chief executive, said the move partly reflected the “competition coming, especially from North American producers, which are benefiting from very privileged access to energy and raw material.”

Germany’s Lanxess is set to cut 1,000 jobs by the end of 2015 in response to a fall in demand for synthetic rubber from the automotive industry. About 40 per cent of the company’s sales are linked to the automotive and tyre industries.

“Lanxess is suffering at the moment from the temporary market weakness in tyres and more broadly in automotive,” Axel Heitmann, chief executive, tells the FT. “We’re focused more than ever on technology and innovation because high-end products are less cyclical and less affected by pricing pressure.”

However, the rise of Middle East and Asian rivals over the past decade long ago convinced European chemical companies that they cannot succeed in commodity chemicals.

That triggered years of restructuring and careful portfolio management that continues to this day to counter the challenge from Chinese companies that are striving to make more complex intermediates rather than just basic chemicals.

“Most have moved downstream in Europe to protect their position. They’re moving into speciality areas which are much more technology and customer focused,” says Anton Ticktin, partner at Valence Group, the specialist chemicals advisory firm.

In an example of such customer focus, BASF recently struck a partnership with Adidas to supply special foams with a unique particle structure that helps a running shoe absorb impact and give it spring.

Kurt Bock, chief executive of Germany’s BASF, believes the world’s biggest chemical maker by sales will remain competitive in spite of shale developments as it has largely exited ethylene-based chemicals.

Still, European chemical producers know they cannot ignore developments in the US and all insist Europe must do something about its competitive position in energy or risk investments going elsewhere.

Energy costs can account for more than half of the production costs of chemical companies. Ineos’ ChlorVinyls plant in Runcorn, for example, uses as much power as the neighbouring city of Liverpool.

Tata Chemicals in October said it would shut a soda ash plant in Northwich in the UK, with the loss of 220 jobs after energy prices more than doubled in the past few years.

However, European chemical companies are not leaving their US rivals to enjoy all the benefits from low feedstock and energy prices

BASF is converting a naphtha cracker in Port Arthur, US to run on ethane. Meanwhile, Linde, the German industrial gases company, is to invest $200m at a site in Texas to create the world’s largest natural gas based gasification complex for syngas chemicals.

Moreover, the jury is still out on whether the huge expansion of US chemical production will pay dividends in the long term.

“My outlook for European chemical industry is not terribly depressed as I don’t believe there is any sound fundamental reason for the divergence between natural gas and crude oil prices,” Mr Hodges, the consultant, said.

“The US is adding 10m tonnes of export-orientated ethylene capacity . . . But who are they going to export it to? I believe they are doomed to fail as there is no market for it.”

By Chris Bryant of the Financial Times

The full article is visible via the link below – Pankaj Oswal

http://www.ft.com/cms/s/0/1bec96c4-58d2-11e3-9798-00144feabdc0.html#axzz2n2dhPde7

Haldia Petrochemicals’ networth erodes by 50%

The news coming out of Haldia Petrochemicals is cause for concern.  There do appear positive signs, however, that the company is prepared to find ways to turn it around.

After suffering a string of losses, the networth of Haldia Petrochemicals (HPL) has eroded by 50 percent.

After a board meeting and EGM of HPL on Friday, chairman of the company and state Industry Minister Partha Chatterjee said every step would be taken to prevent the company from going to the Board for Industrial and Financial Reconstruction (BIFR).

All the stakeholders had been informed at the EGM about the state of the company, he said.

Chatterjee also said the company might again approach the lenders for infusion of funds and added that other efforts would also be made. He, however, declined to divulge further.

The HPL board on Friday approved the appointment of UK Basu, former MD of MRPL , as the managing director of the company till March 2014. Chatterjee said that Basu had been asked to draw a roadmap for the company for a period of five years and a financial budget till next March.

About WBIDC’s stake sale in HPL to Indian Oil Corporation, the minister said that the matter was sub-judice.

The full article is visible via the link below – Pankaj Oswal

http://www.moneycontrol.com/news/business/haldia-petrochemicals-networth-erodes-by-50_995878.html