Westlake Chemical assesses damage from winter weather; Impact of freezing on plastic prices; Cheniere LNG export capacity to expand; Orbia's net for 2020 lower; Rail traffic slower on-year
Westlake Chemical assesses damage from winter weather; sees impact on pricing
Below freezing weather that covered nearly all of Texas and Louisiana for several days in mid-February involving large outages led to higher prices for some plastics and disruptions.
“Last week, extreme winter weather across much of Texas and Louisiana caused widespread power outages and disrupted feedstocks, raw materials and utilities to many plants in our industry, including some of our plants,” said on Feb. 23 Steven Bender executive vice president and chief Financial Officer at Westlake Chemical.
“While we are still assessing the impact of the storm, our estimate for loss margins from sales and repair expenses are approximately $120 million. Approximately $100 million will impact the company’s first quarter 2021 results” with the remainder falling into the second quarter, Bender said according to Motley Fool transcripts.
Impact of freezing on plastics pricing
“According to a (consulting and pricing agency) IHS report, since June of 2020, the industry was able to increase prices in 2020 by $0.20 a pound in PVC. And in 2021, industry passed through price increases of $0.04 a pound in January and $0.03 a pound in February. And also price announcements made for March with a price increase of $0.07 a pound,” said Albert Chao, Westlake Chemical president and Chief Executive Officer.
“So, time will tell whether that $0.07 will be pushed through. But, the issue now with all the freezes, 100% of Texas as of yesterday, 100% of Texas ethylene plants are offline and 75% of total U.S. ethylene plants are offline,” he said.
Cheniere LNG exports to expand, sees higher demand from Asia
Cheniere exported 130 cargoes of LNG during the fourth quarter from its two terminal facilities which which are Sabine Pass, Louisiana and Corpus Christi, Texas. Both terminals are undergoing expansion.
“As we discussed last year, the construction schedule for Train 6 at Sabine Pass was accelerated with substantial completion now targeted for the second half of 2022,” said company Chief Executive Jack Fusco, referring to a project initially targeted for 2023, according to Motley Fool transcripts of the call.
At Corpus Christi, Train 3 is in late stage commissioning and produced its first commissioning cargo in December of last year. Commissioning and start-up continues to test and tune Train 3 systems and the company expects to be able to announce substantial completion in the coming weeks, officials said during earnings on Feb. 24.
Strong LNG demand from China
A severe cold snap across Asia in December and continued GDP expansion in China induced the spike in demand and opened the arbitrage window, making European reloads to Asia Economic for the first time in many months, and driving a sharp decline in LNG imports to Europe.
China's LNG consumption rallied 17% year-on-year to 21 million tonnes during the fourth quarter, making China the largest global LNG consumer for the quarter.
Chinese LNG demand increased 12% for the full year 2020 to about 70 million tonnes, closely approaching Japan as the largest consumer, said Anatol Feygin, the company’s Chief Commercial Officer.
Japan and South Korea also returned to demand growth in Q4 after two consecutive quarters of year-on-year declines.
The LNG industry realized incredible growth over the past four years, adding more than 117 million tonnes of capacity, an annual average of almost 30 million tonnes. That average is estimated to drop by over 60% to 11.5 million tonnes per year over the next four years, said Zach Davis, Chief Financial Officer.
While cargo cancelations largely abated during the fourth quarter, compared with the preceding quarters, the company recognized in Q4 2020 $38 million of revenues related to cancelled cargoes that would have been lifted in the first quarter of 2021.
Orbia’s net for 2020 lower
Mexico-based Orbia said on Feb. 24 that for the fourth quarter 2020 it posted net revenue of $1.7 billion, a 6% on-year increase driven by strong PVC prices.
For the full Year 2020 the company posted net revenue of $6.4 billion, a decrease of 8% it related to Covid-19.
Orbia has over 22,000 employees worldwide. Until 2019 the company used to be known as Mexichem.
Rail traffic remains slower on-year
The Association of American Railroads (AAR) said that for the week ending February 20, total U.S. weekly rail traffic was 377,904 carloads and intermodal units, down 22% compared with the same week last year.
Total carloads for the week ending February 20 were 171,642 carloads, down 26% compared with the same week in 2020, while U.S. weekly intermodal volume was 206,262 containers and trailers, down 17% compared with 2020.
None of the carload commodity groups posted an increase compared with the same week in 2020. Commodity groups that posted decreases compared with the same week in 2020 included chemicals, down 9,400 carloads, to 23,864.
North American rail volume for the week ending February 20, 2021, on 12 reporting U.S., Canadian and Mexican railroads totaled 257,127 carloads, down 22% compared with the same week last year, and 286,467 intermodal units, down 11.9% compared with last year.
By Reuters Events Downstream