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VOLUME XXI
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October 26, 2020
BorsodChem eyes third quarter 2021 startup for aniline plant in Hungary October 26/2020 MOSCOW (MRC) — BorsodChem (Kazincbarcika, Hungary) is planning to start production at its new 200,000-metric ton/year aniline plant in Kazincbarcika during the third quarter of 2021, reported Chemweek with reference to market sources.
The facility in northern Hungary has received around EUR45 million (USD53 million) in state subsidies from the Hungarian government, which were approved by the European Commission in 2018. Production was initially scheduled to start in the second quarter of next year, but progress has been delayed due to COVID-19 and other “unforeseen issues,” according to market sources.
BorsodChem is owned by China’s Wanhua Chemical Group and currently sources imports of aniline from its parent company in China. With the construction of the new unit, BorsodChem is aiming for improved integration and less reliance on imports.
“Long term, Borsodchem is planning to stop importing aniline from Wanhua Chemical Group, but when exactly the producer will be self-sufficient is not clear,” sources say. The company usually carries out maintenance at its existing methylene di-para-phenylene isocyanate (MDI) and toluene diisocyanate (TDI) units during the summer months. The startup of operations at its new aniline plant is “more likely” after the second quarter of 2021, says one industry participant.
Aniline is used in the production of MDI. BorsodChem has a production capacity for 300,000 metric tons/year of MDI at its integrated complex in Kazincbarcika. It also produces TDI, chlorine, caustic soda, and polyvinyl chloride (PVC) at the complex.
“We are not entitled to share information on the new projects, except from the already public information that BorsodChem is planning to start the aniline plant in 2021, with a maximum capacity of 200,000 metric tons/year,” BorsodChem says.
As MRC informed earlier, BorsodChem shut its PVC plant in Kazincbarcika for a scheduled turnaround in the first week of September, 2020. The restart date of this plant with the capacity of 400,000 mt/year of PVC could not be ascertained.
According to MRC’s ScanPlast report, Russia’s overall PVC production totalled 718,500 tonnes in January-September 2020, down by 0.3% year on year. At the same time, only two producers managed to increase their PVC output.
Wanhua-BorsodChem is a Hungarian chemical raw material manufacturing company headquartered in Kazincbarcika, Northern Hungary. It is the European member of the Wanhua Chemical Group. The company specializes in isocyanates (MDI, TDI), PVC and chlor-alkali (vinyl) businesses.[1] The main production site is located in Kazincbarcika, Hungary but the production is also supported by other European production capacities located in Ostrava, the Czech Republic and Kedzierzyn-Kozle, Poland. Several branch offices are available in Hungary, Belgium, the Czech Republic, Croatia, Italy and Poland.
October 26, 2020
BorsodChem eyes third quarter 2021 startup for aniline plant in Hungary October 26/2020 MOSCOW (MRC) — BorsodChem (Kazincbarcika, Hungary) is planning to start production at its new 200,000-metric ton/year aniline plant in Kazincbarcika during the third quarter of 2021, reported Chemweek with reference to market sources.
The facility in northern Hungary has received around EUR45 million (USD53 million) in state subsidies from the Hungarian government, which were approved by the European Commission in 2018. Production was initially scheduled to start in the second quarter of next year, but progress has been delayed due to COVID-19 and other “unforeseen issues,” according to market sources.
BorsodChem is owned by China’s Wanhua Chemical Group and currently sources imports of aniline from its parent company in China. With the construction of the new unit, BorsodChem is aiming for improved integration and less reliance on imports.
“Long term, Borsodchem is planning to stop importing aniline from Wanhua Chemical Group, but when exactly the producer will be self-sufficient is not clear,” sources say. The company usually carries out maintenance at its existing methylene di-para-phenylene isocyanate (MDI) and toluene diisocyanate (TDI) units during the summer months. The startup of operations at its new aniline plant is “more likely” after the second quarter of 2021, says one industry participant.
Aniline is used in the production of MDI. BorsodChem has a production capacity for 300,000 metric tons/year of MDI at its integrated complex in Kazincbarcika. It also produces TDI, chlorine, caustic soda, and polyvinyl chloride (PVC) at the complex.
“We are not entitled to share information on the new projects, except from the already public information that BorsodChem is planning to start the aniline plant in 2021, with a maximum capacity of 200,000 metric tons/year,” BorsodChem says.
As MRC informed earlier, BorsodChem shut its PVC plant in Kazincbarcika for a scheduled turnaround in the first week of September, 2020. The restart date of this plant with the capacity of 400,000 mt/year of PVC could not be ascertained.
According to MRC’s ScanPlast report, Russia’s overall PVC production totalled 718,500 tonnes in January-September 2020, down by 0.3% year on year. At the same time, only two producers managed to increase their PVC output.
Wanhua-BorsodChem is a Hungarian chemical raw material manufacturing company headquartered in Kazincbarcika, Northern Hungary. It is the European member of the Wanhua Chemical Group. The company specializes in isocyanates (MDI, TDI), PVC and chlor-alkali (vinyl) businesses.[1] The main production site is located in Kazincbarcika, Hungary but the production is also supported by other European production capacities located in Ostrava, the Czech Republic and Kedzierzyn-Kozle, Poland. Several branch offices are available in Hungary, Belgium, the Czech Republic, Croatia, Italy and Poland.
October 23, 2020
Jim Fitterling
Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT was $104 million, down from the year ago period due to weaker demand and margin compression. On a sequential basis, the segment grew operating EBIT by $324 million and expanded operating EBIT margins by more than 1,200 basis points driven by significant volume recovery in polyurethane applications as demand rose for durable goods and construction end markets.
The polyurethanes and construction chemicals business reported a net sales decline year-over-year, despite benefiting from demand growth in furniture, bedding and appliances. Compared to the prior quarter, the business delivered double-digit volume growth in nearly all regions with particular strength in consumer durables, construction and automotive and markets. As a result of rising demand, we increased operating rates by approximately 20% over the second quarter.
Howard Ungerleider
Now moving to Sadara on Slide 7. Consistent with the growth captured in our core packaging and polyurethane businesses from the ongoing economic recovery, Sadara is also benefiting from end market resilience and market supply tightness. As a result, the JV’s financial and operational performance continues to improve with an equity earnings uplift of approximately $100 million year-over-year. And Dow’s expected contribution for 2020 has now been reduced by 20% to no more than $400 million.
In addition, the structural changes that will be implemented to enhance Sadara’s long-term feedstock flexibility through additional ethane and an extension of natural gasoline lean allocation will improve its position on the global cost curve. Dow, Saudi Aramco and Sadara continue to make good progress toward debt reprofiling with the lenders. We remain on target to have an agreement to reprofile Sadara’s project financing debt by year-end.
Steve Byrne
Yes. Good morning. I wanted to drill in a little — more on this $300 million cost savings initiatives. How much of that would you say is actual headcount reduction versus workforce costs, like T&E and another bucket could be the asset rationalization? And what do you think the net benefit could be in 2021 in COGS and SG&A?
Jim Fitterling
Howard, do you want to take that and kind of unpack what the costs are?
Howard Ungerleider
Yes. Look, I would say from a hard dollar savings standpoint, you should expect about $150 million to drop to the bottom line in 2021. And then the balance of the $300 million, another $150 million in 2022. It includes a 6% reduction in our workforce costs. So that doesn’t mean 6% headcount. I mean, obviously we’re trying hard to trim the high-end of the pyramid. Obviously, we’re also looking at streamlining. When you think about it from a segment level perspective, it’s about a little bit more than a third in P&SP, and then the balance split between Industrial Intermediates & Performance Materials and Chemicals.
Kieran de Brun
I was just wondering, demand for polyurethane — good morning. Demand for polyurethane has clearly improved substantially in this quarter. I know it’s a little bit early, but can you discuss any preliminary demand trends you’re seeing in 4Q and maybe how you view 2021 versus 2019 demand levels, that would be helpful. Thank you.
Jim Fitterling
We saw double-digit volume growth quarter-over-quarter, and it primarily was driven by consumer durables, appliances, construction and automotive end markets. So they’re up. Although some of them are still below last year’s levels. Automotive, for example, is up, but it’s still below 2019 levels. I think it’s going to continue.
Appliances are still very, very strong and there’s a lot of backlog on appliances and the supply chains after what we went through in the second quarter and into the third quarter, the supply chains are tight in some areas. So you’re seeing a lot of backlogs and we’re catching up with that demand. So I think it’s going to continue through the fourth quarter for sure. And then we’ll keep an eye on how it goes beyond that.
China, I would say already in almost all markets has returned to pre-COVID levels. And so we may actually start to see overall growth in China, which would be good. I would say some markets in the rest of the world, like appliances, like packaging are at pre-COVID levels, but not all. In automotive, it’s still shallow to pre-COVID levels and probably will be for a couple of years, I expect.
Operator
And we’ll move on to Kevin McCarthy with Vertical Research Partners.
Kevin McCarthy
Good morning. Jim, just to continue the dialogue on polyurethanes, I was curious to hear your thoughts on the supply side. We’ve seen a number of force majeure declarations. Can you speak to where you think inventory levels are in MDI and Polyols as well as operating rates and prospective pricing outlook in the chain?
Jim Fitterling
Yes. Good morning, Kevin. Things are tight as a drum right now on MDI and propylene oxide. I’d say Polyols maybe a little bit better, but it’s propylene oxide that’s pretty tight right now. And I think that’s going to continue. Obviously, when you have an upset in isocyanates operation, you want to get it back as soon as you can, but it sometimes takes a while to get back up and get lined out. So I think things are going to be tied to the fourth quarter. Could extend into the first quarter. We are managing. We are working very closely with customers to try to keep them running and try to keep enough allocation to everybody, so that we can support them through. But it’s a lot of heavy lifting by the team right now.
October 23, 2020
Jim Fitterling
Moving to the Industrial Intermediates & Infrastructure segment. Operating EBIT was $104 million, down from the year ago period due to weaker demand and margin compression. On a sequential basis, the segment grew operating EBIT by $324 million and expanded operating EBIT margins by more than 1,200 basis points driven by significant volume recovery in polyurethane applications as demand rose for durable goods and construction end markets.
The polyurethanes and construction chemicals business reported a net sales decline year-over-year, despite benefiting from demand growth in furniture, bedding and appliances. Compared to the prior quarter, the business delivered double-digit volume growth in nearly all regions with particular strength in consumer durables, construction and automotive and markets. As a result of rising demand, we increased operating rates by approximately 20% over the second quarter.
Howard Ungerleider
Now moving to Sadara on Slide 7. Consistent with the growth captured in our core packaging and polyurethane businesses from the ongoing economic recovery, Sadara is also benefiting from end market resilience and market supply tightness. As a result, the JV’s financial and operational performance continues to improve with an equity earnings uplift of approximately $100 million year-over-year. And Dow’s expected contribution for 2020 has now been reduced by 20% to no more than $400 million.
In addition, the structural changes that will be implemented to enhance Sadara’s long-term feedstock flexibility through additional ethane and an extension of natural gasoline lean allocation will improve its position on the global cost curve. Dow, Saudi Aramco and Sadara continue to make good progress toward debt reprofiling with the lenders. We remain on target to have an agreement to reprofile Sadara’s project financing debt by year-end.
Steve Byrne
Yes. Good morning. I wanted to drill in a little — more on this $300 million cost savings initiatives. How much of that would you say is actual headcount reduction versus workforce costs, like T&E and another bucket could be the asset rationalization? And what do you think the net benefit could be in 2021 in COGS and SG&A?
Jim Fitterling
Howard, do you want to take that and kind of unpack what the costs are?
Howard Ungerleider
Yes. Look, I would say from a hard dollar savings standpoint, you should expect about $150 million to drop to the bottom line in 2021. And then the balance of the $300 million, another $150 million in 2022. It includes a 6% reduction in our workforce costs. So that doesn’t mean 6% headcount. I mean, obviously we’re trying hard to trim the high-end of the pyramid. Obviously, we’re also looking at streamlining. When you think about it from a segment level perspective, it’s about a little bit more than a third in P&SP, and then the balance split between Industrial Intermediates & Performance Materials and Chemicals.
Kieran de Brun
I was just wondering, demand for polyurethane — good morning. Demand for polyurethane has clearly improved substantially in this quarter. I know it’s a little bit early, but can you discuss any preliminary demand trends you’re seeing in 4Q and maybe how you view 2021 versus 2019 demand levels, that would be helpful. Thank you.
Jim Fitterling
We saw double-digit volume growth quarter-over-quarter, and it primarily was driven by consumer durables, appliances, construction and automotive end markets. So they’re up. Although some of them are still below last year’s levels. Automotive, for example, is up, but it’s still below 2019 levels. I think it’s going to continue.
Appliances are still very, very strong and there’s a lot of backlog on appliances and the supply chains after what we went through in the second quarter and into the third quarter, the supply chains are tight in some areas. So you’re seeing a lot of backlogs and we’re catching up with that demand. So I think it’s going to continue through the fourth quarter for sure. And then we’ll keep an eye on how it goes beyond that.
China, I would say already in almost all markets has returned to pre-COVID levels. And so we may actually start to see overall growth in China, which would be good. I would say some markets in the rest of the world, like appliances, like packaging are at pre-COVID levels, but not all. In automotive, it’s still shallow to pre-COVID levels and probably will be for a couple of years, I expect.
Operator
And we’ll move on to Kevin McCarthy with Vertical Research Partners.
Kevin McCarthy
Good morning. Jim, just to continue the dialogue on polyurethanes, I was curious to hear your thoughts on the supply side. We’ve seen a number of force majeure declarations. Can you speak to where you think inventory levels are in MDI and Polyols as well as operating rates and prospective pricing outlook in the chain?
Jim Fitterling
Yes. Good morning, Kevin. Things are tight as a drum right now on MDI and propylene oxide. I’d say Polyols maybe a little bit better, but it’s propylene oxide that’s pretty tight right now. And I think that’s going to continue. Obviously, when you have an upset in isocyanates operation, you want to get it back as soon as you can, but it sometimes takes a while to get back up and get lined out. So I think things are going to be tied to the fourth quarter. Could extend into the first quarter. We are managing. We are working very closely with customers to try to keep them running and try to keep enough allocation to everybody, so that we can support them through. But it’s a lot of heavy lifting by the team right now.
October 23, 2020
Cost hikes, shortages create headaches for Europe PU industries
Author: Fergus Jensen
2020/10/15
- October isocyanates contracts increases of up to €300/tonne
- Polyols contracts climb up to €150/tonne
- Shortages seen in polyols, TDI, crude MDI markets
- Strong flexible, rigid foam demand seen continuing in November
- More delays, order cancellations expected in coming weeks
LONDON (ICIS)–Supply disruptions rocked the Europe polyurethane (PU) market this week, where flexible and rigid foam producers have grappled with shortages of isocyanates and polyols feedstock, strong demand and sharp increases in pricing for October.
“It’s more than tight,” one Europe-based PU foam producer said. “Today we cannot produce, nor tomorrow.”
October isocyanates contracts were assessed this week with increases of up to €300/tonne from September. Polyols October contracts climbed to levels not seen since 2015.
TDI
The toluene diisocyanate (TDI) market was shortened further this week, after producer Covestro declared force majeure on product in Europe, the Middle East and Africa, following a pump failure at its Dormagen plant. That follows a force majeure in place on production from the Ludwigshafen plant operated by BASF, the region’s biggest producer.
Foam producers have been struggling with delayed feedstock orders, and in some cases have had to cancel their customer orders.
“Everybody is getting pissed off,” said one Europe-based isocyanates reseller, referring to the recent price hikes and order cancellations. “Contracts are being cancelled everywhere.”
The recent sharp increases in flexible polyurethane foam feedstock costs are also creating difficulties where those increases cannot immediately be passed through to customers.
“We cannot eat every price increase,” one foam producer said, noting that there were concerns foam buyers would switch to alternative products like latex and spring mattresses.
“The problem then is we need to regain our market.”
The shortage of stock means some plants will be shut despite the current high demand situation.
“The decision now is which plants to shut,” a Europe-based foam producer said. “There’s a big lack of material and it’s almost impossible to get material from outside sources.”
October TDI contract prices were assessed this week jumping €300/tonne at both the upper and lower ends of the range, to €2,250-2,600/tonne FD (free delivered) W (west) Europe.
It was the fourth consecutive monthly increase in TDI contract prices, which are now at levels last seen in 2018. The range is now €850-1,150/tonne above levels hit in June of this year.
Feedback on October contracts was heard between €1,800-2,700/tonne FD W Europe, with increases heard from €150-450/tonne from September levels, although the bulk of business is believed to have been conducted within a narrower range.
Crude MDI
Demand has been unusually strong for October in the crude methylene diphenyl diisocyanate (MDI) market, and supply has been limited or short.
“Demand is just relentless,” one rigid foam producer said, referring to activity in construction beating expectations in recent months.
Crude or polymeric MDI (PMDI) contracts for October were assessed this week climbing €50/tonne at the lower end and €70/tonne at the upper end of the range, to €1,600-1,900/tonne FD W Europe.
October contract prices were heard between €1,500-2,000/tonne FD W Europe, with changes from September prices heard between rollovers and increases of €120/tonne.
The bulk of business is believed to have been transacted within a narrower range.
There were several unconfirmed reports this week of issues affecting supply from Covestro, which has three MDI production sites in Europe.
The production issues have led to some order cancellations among rigid foam suppliers, and high demand levels are seen continuing in November.
PURE MDI
Demand for pure or monomeric MDI (MMDI) has improved in Turkey and the Middle East, where shoe sole production has increased.
“You can increase the price easily in the Middle East and Turkey because there’s basically no supply,” a Europe-based pure MDI producer said.
October contracts were assessed this week climbing €50-100/tonne to €1,850-2,100/tonne FD W Europe.
Feedback on October contracts was heard in a wide range from €1,650-2,400/tonne FD W Europe, with changes from September ranging from rollovers to increases of €250/tonne. The bulk of business is believed to have been conducted within a narrower range.
POLYOLS
The Europe polyols market is tight following feedstock propylene oxide (PO) and ethylene oxide (EO) supply constraints, alongside strong downstream demand.
“Demand is much higher than our availability,” one Europe-based polyols producer said.
October conventional polyether polyols contracts were assessed this week with increases of €150/tonne at the lower end and €100/tonne at the upper end of the range, to €1,650-1,850/tonne.
The upper end of the range is now at its highest level since January 2015.
Feedback on October contract settlements was heard in a wide range this month from €1,450-1,880/tonne FD (free delivered) NWE (northwest Europe) depending on grade, volume and location. Feedback on increases from September was also wide, ranging from €50/tonne at the low end up to €300/tonne at the high end. In both cases, the bulk of business is believed to have been carried out within a narrower range.
Supply is currently tight or short, and a force majeure on polyols from producer Dow remains in place. There have been unconfirmed reports of supply constraints from other producers including Repsol.
Demand for flexible foams is strong and has been supported by a boom in home improvement linked to coronavirus pandemic lockdowns. Demand for furnishing is expected to remain strong through to the end of the year.
Focus article by Fergus Jensen
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