US chems in China escape immediate quake harm

14 May 2008 00:22  [Source: ICIS news]

US chems unharmed by quakesBy Stephen Burns

HOUSTON (ICIS news)--US chemical companies with operations in China appear to have escaped any direct harm from Monday's earthquake, but there could be ongoing ramifications for the industry at home and abroad, sources said on Tuesday.

"It was a horrible, horrible thing," said Dow Chemical spokesman David Winder. "(But) all of our offices and sites are operating normally. We continue to monitor the situation."

Of Dow's six manufacturing sites in China, the closest to the earthquake was an adhesives and sealants plant in Wuhan, some 1,000 kilometres (621 miles) away from Chengdu, the city in Sichuan province that was hard-hit by the quake.

DuPont spokesman Anthony Farina said the company has a refrigerants plant located only 92km from the epicentre in the city of Changshu, but it was unscathed.

There has been no earthquake impact on any of DuPont's total of 16 manufacturing sites in China, Farina said.

Celanese spokesman Jeremy Neuhart said the company's acetic acid plant in Nanjing was too far away to be affected.

"We've not seen any major business disruption so far," Neuhart said.

Eastman Chemical also has a manufacturing site in Nanjing and another in Shandong, which is likewise relatively far from the quake zone.

Other major US companies with operations in China include Hexion, Huntsman, Rohm and Haas, and Honeywell. None of these firms have yet reported any damage to their facilities or interruption to their operations.

Across the chemical spectrum, US market participants were seeing some scenarios in which the quake could affect the supply/demand balance.

But most sources readily admitted it was too soon to tell how the earthquake impact would play out, and noted that the region most affected was not significant in terms of chemical activity despite being a major producer of natural gas.

“With the exception of a fertilizer plant, it was far away from most petrochemical plants. Except for distracting the Chinese government, I expect little impact from the earthquake,” a US trader of ethylene glycol (EG) said.

But that source and others acknowledged that their assessments could change as more information about the disaster becomes available. Actual price reaction in US chemical markets so far was negligible.

Most speculation centred on whether demand for materials for reconstruction would pull on the global market balances. The areas affected by China's earthquake could take one to two years to fully recover and rebuild their infrastructure, Standard & Poor's Rating Service (S&P) said.

A North American-based methanol buyer said that if clean-up efforts take a substantially long time, methanol demand could spike higher alongside demand for formaldehyde, a downstream product used in construction materials.

Similarly, a US-based trader of ethylene dichloride (EDC), which is used in the manufacture of polyvinyl chloride (PVC), said demand for US supplies of the feedstock might increase.

As well as natural gas, Sichuan is a coal producing province, and China’s acetylene-based method of PVC production uses coal-derived calcium carbide as its major feedstock.

If that supply is interrupted, China’s minority of ethylene-based PVC producers may increase production and demand for US EDC.

“Right now we haven’t seen any unexpected increase in demand, but by next week we may see that starting to take shape,” the trader said.

China took 33% of US EDC exports in March, according to the US International Trade Commission.

How the earthquake impact would play out alongside the effect of the Beijing Olympic Games was another issue on the minds of US sources.

“This could end up in redistribution [of materials] for the Chinese market,” a North American plastics producer said.

A disruption of fuel supply to the country’s manufacturing sector would certainly have some impact on global markets, especially in a year when the world’s most populated nation is hosting the summer games, the producer said.

Chinese Premier Wen Jiabao on Tuesday evening said that saving lives is still the priority of current relief work following the quake, according to state news agency Xinhua.

The official death toll exceeds 12,000 victims.

(With additional reporting by Landon Feller, Greg Holt, Lane Kelley, Gene Lockard, George Martin, and Steven McGinn)

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By: Stephen Burns
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