SK Innovation sees refining margins rebounding on IMO

: Oil products, Petrochemicals
19/07/29

South Korean refiner SK Innovation has raised its forecast for profit margins on distillates in this year's second half, as buyers begin to stock up on low-sulphur fuel and start testing ahead of International Maritime Organisation's cap on sulphur in marine fuels from 1 January 2020.

Margins also will get a boost from seasonal demand for gasoline, SK said. The outlook follows an April-June quarter in which the Asia-Pacific refining margin benchmark the Singapore GRM dropped to a decade-low of $1/bl from $2.70/bl a year earlier.

SK said gains in crude and fuel prices stalled late in the quarter as the US-China trade war deepened, raising uncertainty about the global economy. Margins rose in the third quarter, with the Singapore GRM averaging $6.90/bl through the first 25 days of July.

This outlook echoed that of rival South Korean refiner S-Oil.

SK said it sees petrochemical margins continuing to slump. Margins will remain weak amid China's slowing economic growth and additions of paraxylene (PX) capacity, the company said.

The average profit margin on polyethylene (PE) dropped to $479/t in the second quarter, down by 11pc from the previous three months, SK said. PE spreads slid by 28pc to $378/t, while PX margins fell to just $365/t, down by 35pc from the January-March average. But the average benzene margin rose by 21pc to $85/t amid firmer US demand.

SK's second-quarter operating profit fell by 42pc from year earlier to 497.5bn won ($419.8mn). Fellow South Korean refiner Hyundai Oilbank reported a 51pc fall in operating profit to W154.4bn.

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24/12/27

Viewpoint: Consolidation looms in US methanol

Houston, 27 December (Argus) — The sale of Netherlands-based OCI's methanol production assets to rival producer Methanex is set to shift the market, with US methanol production most affected by the move. Methanex in the third quarter of 2024 announced the $2bn acquisition, which is expected to close in the first half of 2025. The boards of directors of both companies and OCI's shareholders approved the transaction, but it is subject to regulatory approvals. OCI operates the 1mn t/yr OCI Beaumont plant and is a 50:50 partner in Natgasoline, a 1.7mn t/yr joint-venture plant between OCI and Proman. Methanex operates three plants in the US, all in Geismar, Louisiana. These plants carry a collective 4mn t/yr capacity and represent one-third of total US methanol capacity. At front and center of the acquisition is the Natgasoline plant in Beaumont. Natgasoline, when operational, represents 14pc of domestic production. The plant opened in 2018, and throughout those six years, the plant has seen its share of operational issues. The most recent was a fire at the reformer unit in early October, resulting in a complete shutdown lasting nearly three months. When the deal was announced, Methanex made it clear that the transaction was subject to approvals by OCI shareholders, as well as a pending legal decision between OCI and Proman. "If it is not settled within a certain period, Methanex has the option to carve out the purchase of the Natgasoline joint venture and close only on the remainder of the transaction," the company said in September. Methanex and OCI declined to give further details, as the deal is still pending. Proman did not respond to a request for comment. If it goes through, the acquisition would result in the exodus of OCI from the US methanol market. But the issue of liquidity in the US spot barge market is also looming. Market participants said OCI is a frequent buyer when the Natgasoline plant goes down. In October, when Natgasoline was completely shut down, 340,000 bl of methanol moved for delivery at ITC, the terminal on the Houston Ship Channel where methanol is exchanged, according to Argus data. Market participants expect liquidity to be about the same until some time after the deal closes. When a plant goes down, a producer will emerge in the spot market for purchases. In the longer term, there are some questions around international distribution and where US methanol exports find a home. Methanex is a major exporter to Asia, whereas OCI sells into the European market. The low-carbon methanol sector will also experience some shakeup. OCI is a major participant in the bio-methanol space, selling volume into Europe. Methanex produces carbon-captured methanol, also known as blue methanol, which has not penetrated the EU market. By Steven McGinn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: PVC expansions loom over US market in 2025

24/12/27

Viewpoint: PVC expansions loom over US market in 2025

Houston, 27 December (Argus) — US polyvinyl chloride (PVC) market participants expect some domestic demand growth in 2025, but recent expansions could limit price increases in both the domestic and export markets. Most producers are optimistic PVC demand will grow at a strong rate in 2025, with some expecting growth above 5pc. But producers also caution that greater volume sales may not translate into higher prices because of additional capacity brought on line in the second half of 2024. Formosa added 130,000 metric tonnes (t) of PVC capacity to its Baton Rouge, Louisiana, plant in the third quarter, and Shintech added 380,000t/yr of PVC capacity to its Plaquemine, Louisiana, plant in the fourth quarter. Producers' concerns that higher sales volume would not translate into higher prices have proven true so far. Domestic PVC sales have grown as much as 8pc in the year through November, according to producers, but PVC contract prices in November were unchanged from January at 57.5¢/lb after some fluctuations during the year. Prices fell by 2¢/lb in the months following Formosa's expansion. Contracts for December, which will represent the month following Shintech's expansion, have not yet settled. Buyers have more muted expectations than producers for demand in 2025, further adding to the modest price outlook for the coming year. This is partly because many buyers believe interest rates that recently began to fall will take time to stimulate housing construction, potentially delaying a rise in PVC demand until late 2025 or even 2026. Lower interest rates can reduce homebuilders' borrowing costs and ease mortgage rates for prospective homebuyers. The cautious outlook was already pervasive among PVC buyers and converters before the US Federal Reserve in December reduced its forecast for 2025 interest rate cuts to half a percentage point, down from a full point in the September projections. Reliance on exports US producers may need to rely on exports to absorb the new capacity, a trend that has kept export prices low since August. US PVC export spot prices were at $700/t fas on average in late September after Formosa ramped up its capacity expansion, compared to an average of $750/t fas a year earlier. After Shintech's expansion, export prices fell to $673/t fas on average by late-December, compared to $695/t fas on average during the same time in 2023. While spot export prices initially had a floor of $670/t fas after both expansions, the global environment has become even more competitive at year-end with some overseas producers struggling to move volume, according to traders. A greater reliance on exports at a time when several countries recently implemented anti-dumping duties on US material could make for a difficult market in 2025, with pricing needing to come down to start the year if there is too much volume on hand, traders said. India recently announced preliminary anti-dumping duties on US PVC from 80-150pc, with duties exceeding $300/t for some US producers. Brazil in October raised import taxes on PVC from 12.6pc to 20pc. The European Commission last month confirmed duties on US-origin PVC between 58-71.2pc, and the UK is considering duties from 38.4-56pc. The Indian duties in particular could pose a challenge to US exporters because US producers and traders had become reliant on Indian customers as an outlet for US supply. India is one of the few countries for US exports with steady demand growth. Should US exporters lose market share in India, there are no immediate alternatives to offset that loss. By Aaron May Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Trump tariffs may inflate midcon fuel costs

24/12/27

Viewpoint: Trump tariffs may inflate midcon fuel costs

Houston, 27 December (Argus) — President-elect Donald Trump's threat to impose tariffs on all Canadian imports would increase costs for producing US midcontinent road fuels, which are largely refined from Western Canadian Select (WCS) crude. Trump said in November that he plans to impose a 25pc tariff on all imports from Mexico and Canada after he takes office on 20 January. Canadian crude is the top feedstock for Midwest refiners, accounting for 66pc of the region's crude runs in September, according to US Energy Information Administration (EIA) data. Parts of the Midwest — as well as California and the northeast US — lack sufficient pipeline capacity to process domestic crude or to receive refined products from elsewhere in the country, according to the American Fuel and Petrochemical Manufacturers (AFPM), which represents many US refiners. So AFPM wants Trump to exclude crude and refined products from his proposed tariffs. Most refiners in the US midcontinent depend on heavy sour crudes, with over 20 marketers and refiners importing crude from Canada in September, including BP's 435,000 b/d Whiting, Indiana, refinery; Cenovus' 151,000 b/d Toledo refinery in Ohio; Marathon Petroleum's 140,000 b/d Detroit, Michigan, refinery; and Phillips 66's 356,000 b/d Wood River refinery in Roxana, Illinois. Generally, heavier sour crudes are less expensive than lighter, sweeter crudes like WTI. The US in September imported 4mn b/d of crude from Canada, accounting for 62pc of total US crude imports and a record high for the month, according to EIA data. The US midcontinent imported 2.6mn b/d of Canadian crude in the month, also a record high for September. In 2023, the region imported 2.7mn b/d of Canadian crude, the highest annual imports recorded for the region, according to the EIA. Canada could move more of its crude through its 590,000 b/d Trans Mountain Expansion (TMX) pipeline to the Pacific coast, where it would head to international markets. US importers could also take more from countries like Saudi Arabia and Venezuela , which produce the heavy, sour crudes favored by refiners in the upper US midcontinent. Each supplied more than 200,000 b/d to the US in September, the largest exporters after Canada and Mexico, according to the EIA. Pipeline movements from the US Gulf coast to the US midcontinent would likely increase if the upper US midcontinent refiners try to replace Canadian heavy sour crude. The region received 23.5mn b/d of crude from the Gulf coast, as the southern US midcontinent processes WTI. But the region would probably face higher landed costs for crude originating from overseas. Refineries would have to be more disciplined with the increased feedstock costs that the threatened tariffs would impose, according to one market participant. The region would still have to rely on Canadian crude because US Gulf coast crude barrels would still cost more, and midcontinent refiners would have difficulty finding alternative sources. WCS Hardisty crude prices have averaged a discount of $17.08/bl to WTI Houston so far in the fourth quarter. For road fuel prices during the fourth quarter to date, Chicago gasoline prices averaged a 1.33¢/USG discount to the US Gulf coast and Chicago ultra low sulphur diesel averaged a 1.34¢/USG discount. But regional spreads between Chicago and the US Gulf coast could continue to narrow if midcontinent refiners reduce operating rates. By Hunter Fite Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Shell shuts oil unit at Singapore refinery

24/12/27

Shell shuts oil unit at Singapore refinery

Singapore, 27 December (Argus) — Shell has shut an oil unit at the 237,000 b/d Pulau Bukom refinery in Singapore to investigate a "suspected leak", said the Maritime and Port Authority of Singapore (MPA) and National Environment Agency (NEA) today. Shell informed the government agencies that they will have to shut one of its "oil processing units" at Pulau Bukom to facilitate investigations into a suspected leak. The exact oil processing unit cannot be confirmed, but it is a unit "used to produce refined oil products such as diesel". This means it is likely a crude distillation unit or a hydrocracking unit. Shell's initial estimates show that a few tonnes of oil products were leaked, together with cooling water discharge. Sea water is typically drawn to aid in the cooling process, according to the media release. This came after the 20 October leak at a pipeline at Pulau Bukom, when 30-40t of "slop" — or a mixture of oil and water — leaked into the sea, according to Shell. The gasoline market has shown little reaction so far with spreads being "stagnant" and "range bound", said a Singapore-based gasoline broker. But this could be because of a lack of market activity, with many traders away for holidays at the end of the year. The gasoil January-February spread last traded at $0.58/bl in backwardation at around 6:30pm Singapore time on 27 December, according to a Singapore-based gasoil broker. This marks a slight increase from an assessment of $0.55/bl in backwardation on 26 December, according to Argus pricing data. By Aldric Chew Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US naphtha market poised for change

24/12/26

Viewpoint: US naphtha market poised for change

Houston, 26 December (Argus) — US Gulf coast naphtha supplies accumulated in the last half of 2024 amid faltering demand, with gasoline blenders representing a higher profile buying sector, but a pending refinery closure is set to tighten the market. Demand for all naphtha grades was much weaker coming into December because of a bearish gasoline outlook and as elevated octane prices dampened naphtha demand. Poor refinery margins encouraged refiners to run minimally, cutting back on refiner demand as well. Gasoline blenders' demand for naphtha dominated in 2024, which highlighted stronger naphtha prices in visible trades. Prices for good quality, low sulphur N+A naphtha into the gasoline blend pool averaged about 10-15¢/USG above generic reformer feedstock naphtha. Naphtha sellers were also keen to export, which moved larger volumes without engaging in volatile domestic spot markets. US naphtha exports this year through mid-December were up by over 50pc to average 272,730 b/d from a year prior, according to Vortexa data. From November to mid-December, naphtha departures from the US were up on the year by 66pc to 312,800 b/d. Despite overall increased exports in 2024, weakened Asia Pacific and European naphtha markets in the latter half of December diminished arbitrage opportunities. Heavy virgin naphtha (HVN) differentials to Nymex RBOB hovered in the mid-to-stronger 30s¢/USG discounts in the first half of December, compared with upper Nymex RBOB -40s¢/USG observed in the same period last year. However, these higher differentials were attributed more to the lower Nymex RBOB pricing basis than market strength. Comparative cash prices hovered around 160¢/USG year on year, despite a 10¢/bl hike in differentials in 2024. Supply, demand changes in store A major supply change in the Gulf coast naphtha market should tighten the ample supply of naphtha by February. LyondellBasell is on schedule to begin a staggered shutdown of its 264,000 b/d refinery in Houston, Texas, in January. The last crude distillation unit (CDU) at the site is expected to shut by February. The refiner is a steady supplier of premium quality HVN with very low sulphur, which is typically sold into the gasoline blending market. Depending on production rates, LyondellBasell, also known as Houston Refining (HRC) in naphtha circles, can load 10-15 barges of the premium quality HVN a month. However, Gulf coast naphtha remains well-supplied. ExxonMobil's third CDU at its 609,000 b/d Beaumont, Texas, refinery started operations in 2023, adding more naphtha production to the region. Naphtha exports were also significant on the demand front in 2024, despite Gulf coast naphtha export opportunities to Venezuela being curbed again on 18 April. US sanctions on oil trades to Venezuela were eased in October 2023, but reimposed by April this year due to fresh political conflict. Naphtha exports to Venezuela are currently restricted to joint-venture partners such as Chevron and Reliance. Some participants hope the incoming administration of president-elect Donald Trump will re-address oil trading with Venezuela, keeping this an item to watch in 2025. US naphtha exports to Venezuela averaged 57,600 b/d in 2024, up from 11,100 b/d during 2023, according to Vortexa, on relaxation of Venezuela sanctions from October 2023 through May 2024. Meanwhile, naphtha exports out of the Gulf coast were still focused on shipments to South America, led by Brazil and Colombia. Exports to Brazil averaged 48,600 b/d in 2024, up by 68pc from 2023 while naphtha arrivals in Colombia averaged 36,600 b/d in 2024, up by 36pc from 2023. Colombia buys light naphtha from the US for use as diluent and sells full-range naphtha out of Mamonal port to the US. By Daphne Tan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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