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European and US chemical companies face headwinds in Q3

by Başak Ceylan -
  • 03/11/2020 (10:26)
The quarterly financial results from the US and the European petrochemical companies suggested continued headwinds from the COVID-19 pandemic. Although some companies reported better results on a quarter-over-quarter basis, analysts reported that the quarterly recovery has been uneven across markets.

The US chemical giant Dow reported a narrower-than-expected quarterly loss of $1 million. This followed a net loss of $217 million seen in the second quarter of 2020. The company also achieved pricing gains of 12% over the prior quarter for polyethylene, largely as a result of resilient packaging demand.

ExxonMobil, another US industry giant, lost $680 million during the third quarter of 2020. However, the third quarter results increased by $400 million from the second quarter, driven by early stages of demand recovery. The company’s chemical sales volumes were also higher than in the second quarter, supported by resilient packaging demand and recovering automotive and construction markets.

LyondellBasell, a Dutch-domiciled multinational chemical company, announced net income for the third quarter 2020 of $114 million. This was 88% lower than a year earlier and also down from $314 million reported in the previous quarter. At the same time, the company reported that strong demand for polyethylene in North America and Asia, as well as hurricane-driven constraints along the Gulf Coast contributed to sale prices during the third quarter.

Austrian company OMV, which owns 75% of Borealis, reported that their net income weakened to €80 million from €377 million reported a year earlier. The weaker results were primarily due to lower prices and reduced demand. Although polyolefin sales volumes increased due to higher demand from healthcare and packaging sectors, the contribution of Borealis decreased by €16 million. This was largely due to weaker integrated polyolefin margins and a weaker contribution from Borouge. OMV reported that the quarterly performance of Borouge was impacted by weaker market conditions in Asia.

Polish corporation PKN Orlen’s net profit decreased by more than 45% year-on-year to PLN688 million during the third quarter. The company’s petrochemicals segment reported a yearly drop of PLN219 million, mainly due to negative macroeconomic impact. Petrochemical sales volumes in the third quarter remained flat year on year at 1.3 million tonnes.

Shell’s chemical segment earnings were $131 million, reflecting a 38% year-on-year drop. Lower earnings came as a result of reduced margins due to a weak price environment compounded by the COVID-19 pandemic.

BP’s petrochemicals business’ underlying profit before tax was $88 million for the third quarter, down from the $113 million reported in the same quarter in 2019. The result for the quarter reflected a significantly weaker margin environment and a pandemic-related demand reduction. BP also reported that the sale of its petrochemicals business to INEOS, agreed in June, remains on track to be completed by the end of this year.
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