Covid-19 pits refiners against ethanol producers, North American rail falls 22% on pandemic, LyondellBasell increases liquidity

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Fuel demand destruction related to Covid-19 threatens refiners as well as ethanol producers. Image courtesy of Planet Fox/Pixabay

Covid-19 fuel demand destruction pits refiners against ethanol producers

The American Fuel and Petrochemical Manufacturers trade association (AFPM) said on April 16, 2020 it supports a request by Louisiana, Oklahoma, Texas, Utah and Wyoming to the Environmental Protection Agency (EPA) to loosen renewable fuel obligations during the Covid-19 pandemic.

AFPM said it appreciates their advocacy “on behalf of their constituents and our industry.”

The requests follow the release of a weekly U.S. Energy Information Administration’s report that refinery utilization fell below 70% as gasoline and jet fuel demand are down 50% and 72%, respectively, it added.

“Costs must be minimized to keep these vital national security assets operating. The capital spent to comply with RFS (Renewable Fuel Standards) mandates would be better spent on retaining employees and continuing operations,” it said.

“It is worth reminding that significant portions of the RFS are being met with imported biofuels,” it added.

That request to the EPA provoked a strong reply by the Renewable Fuels Association (RFA). RFA members supply refiners with biofuels that act as oxygenates and help meet environmental standards mandates aimed at reducing air pollution by allowing engines a cleaner combustion.

“Because EPA translates the RFS into a percentage each year, the renewable fuel blending requirements already adjust in tandem,” Geoff Cooper, president and CEO of the Renewable Fuels Association, separately said in a statement also released on April 16. 

“So, if COVID-19 causes 2020 gasoline and diesel demand to drop 15%, for example, the renewable fuel blending requirements drops by the exact same amount,” it added.

“In any event, the EPA has no authority to grant relief when the RFS itself is not the cause of the ‘severe economic harm (…) The governors themselves acknowledge the problems facing refiners today are driven by Covid-19,” it added.

“These same factors are impacting the ethanol industry as well, and to an even greater extent,” it said.

“Nearly half the nation’s ethanol production capacity has been idled as a result of falling gasoline demand. A general waiver at this point would only serve to close more ethanol plants and kill more jobs across rural America,” Cooper added.

U.S. ethanol producers make ethanol from corn. In Brazil it is obtained from sugar cane.

The AFPM countered that “the relief the governors are seeking is to reduce compliance costs, not ethanol blending.”

North American rail volume hit hard by pandemic

North American rail volume for the week ending April 11 on a dozen reporting U.S., Canadian and Mexican railroads totaled 288,715 carloads, a 22% on-year decline, the Association of American Railroads said.

As for intermodal, traffic fell to 291,347 units, a 19% on-year decline, it added in a report issued on April 15.

“The pandemic is affecting firms in every industry, and railroads are no exception,” said John Gray, senior vicepresident at the AAR.

Total volume for the first 15 weeks of 2020 was 9.7 million carloads and intermodal units, a 7.7% on-year decline.

LyondellBasell sells $2 billion of notes to add liquidity

LyondellBasell Industries said on April 15 in a statement released in Houston that it was selling $500 million worth of notes due 2025, $500 million due 2030 and $1 billion due 2050.

“Net proceeds of the offering are expected to be used for general corporate purposes, including to increase our liquidity and manage short-term debt maturities,” the company said.

Port Houston sees 11% decline, seven blank sailings in March

Port Houston, the largest container port on the U.S. Gulf Coast, reported on April 7 a decline in March volume due to Covid-19.

Container activity began “slowing in late March as expected as the coronavirus outbreak continued to threaten countries across the globe,” Port Houston said in a press release on April 8.

The port handled in March 248,280 twenty-foot-equivalent units (TEUs), an 11% on-year decline.

“In March Port Houston saw a total of seven blank sailings,” the port said. A blank sailing is a sailing canceled by a carrier.

U.S. trucking companies alert about state border controls

Truckers have asked state governors to consider truckers before setting up Covid-19 border controls and closing state administrative offices, the American Trucking Associations (ATA) said on April 14.

The ATA pointed that for example Utah started to require any driver entering the state to fill out time-consuming questionnaires including their medical history and a two-week travel report.

Federal officials and the Utah trucking association chapter were eventually able to get the governor to exempt truckers from that requirement.

“Obstacles, whether physical, electronic or otherwise, impede the flow of commerce and deter truck traffic,” the organization said.

In addition, “the closing of state drivers license agencies has created a hurdle for new drivers seeking to join the profession. States should ensure SDLAs remain open,” it added.

The organization reiterated past demands to keep public rest stops and truck parking open, as well as to continue to keep open places to eat along highways as well as public bathrooms.

Nova completes sale of stake in Bayport Polymers to Borealis

Nova Chemicals Corp. said on April 15 it completed the previously announced sale of its 50% ownership interest in Novealis Holdings to Borealis.

Novealis is the joint venture formed in 2018 between Borealis and Nova. It later set up an equal joint venture with an affiliate of France-based Total to launch Bayport Polymers in Houston.

By Petrochemical Update