Who’s Being Sanctioned? Cheap Russian Crude Benefits Some High-Cost Regions At A Significant Expense To Others

Companies Mentioned: Nova Chemicals, LyondellBasell, ExxonMobil, Westlake, Braskem, Versalis, Repsol, Nutrien, CF Industries, LSB Industries, Mitsubishi Corporation, SK Innovation, BASF, Dow, Air Liquide, Neste, Covestro, Pembina, Indorama Ventures, Idemitsu Kosan, Evonik, Sibur, NextChem, LG Chem, Bharat Petroleum, Livent, Allkem, Amogy, Altus Power, Unico Solar, Deepak Nitrite, Petronet, Orica, LG Energy, Equinor, Octopus Energy, FedEx, General Mills
Commodities Mentioned: Plastics (PVC, PP, PE, PU, PC, PET, etc.), Clean Energy Minerals, Carbon Dioxide, Hydrogen, Natural Gas/NGLs, Crude/Naphtha

Key Points

China has imported ~20% more discounted Russian crude oil YTD in 2023 compared to 2022, a benefit to its global petrochemical production cost position and export market competitiveness.
We discuss Russian crude oil exports to Turkey, India, and Turkey, noting that some industry estimates suggest Turkey’s refineries are among the most cost-advantaged in the Mediterranean.
We discuss chemical feedstock movements mid-week, flagging weakness in European naphtha relative to Asia, and the Asia natural gas price decline this week relative to the US and Europe.
We highlight recent weakness in ammonia markets, citing lower production costs abroad and seasonally weak demand, and discuss Japanese hydrogen subsidies and flag news at Amogy.
The Panama Canal and Suez Canal face issues limiting freight movements, but they have not notably impacted freight rates yet, and we note upcoming Mexico restrictions on GM corn.

Exhibit #1: China’s imports of Russian crude oil have risen more than 20% YTD relative to 2022.