Europe EO customers unfazed by Dow’s UK plant closure

28 January 2010 17:54  [Source: ICIS news]

LONDON (ICIS news)--Dow Chemical's closure of its ethylene oxide (EO)/ethylene glycol plant at Wilton in the UK has left customers unruffled, despite current tight European supply, as they have had ample time to come up with contingency plans, they said on Thursday.

“We started sourcing alternative [EO] supplies [from mainland Europe] for more than one year and this was rubber stamped last year, when the closure was officially announced,” one customer said.

“There is enough EO to be sourced by UK customers in Europe,” the customer added.

The same customer was keen to point out that the current limited supply flexibility in the European EO market was not caused by the Wilton closure, but was the result of strong demand in the downstream monoethylene glycol (MEG) sector, cracker issues and EO plant maintenance.

“We already positioned ourselves elsewhere, [prior to the actual plant closure] and our sites are running with no limitations,” said another EO buyer, who added that its contracts were fully covered.

EO customers said Dow's closure would mean higher freight costs for imports from mainland Europe. There was also seen to be "a logistical risk factor" with bad weather likely to affect shipping, but one buyer said that this was likely to be minimal when compared to road disruption in parts of Europe caused by strikes.

For the sell-side there were concerns, particularly for EO. “If all European EO production is running, supply will be ok, but when there are issues, there will be no additional buffer," said one seller, added that the closure had not caused the EO market tightness but it would mean the market would be tighter during shutdown periods.

Another said EO/MEG producer said the loss of MEG production there would mean Europe would become more and more dependant on import flow, while another supplier saw the demise of Wilton as less of an issue for MEG than for EO due to the influx of MEG imports from the Middle East.

A purchaser of MEG agreed, stressing that the future of Europe was in imports, particularly if production costs remained so much lower in the Middle East.

“Sooner or later imports will fulfil...European demand. It is just a question or time,” he said.

MEG was tight in January because of a lack of imports and contract prices shot up by €125/tonne from December, to €785/tonne ($1,106/tonne) FD (free delivered) NWE (northwest Europe).

Dow confirmed that it had halted its EO and MEG production at its Wilton plant on 18 January 2010, following an official announcement in 2009.

The closure was brought about by poor profit margins, which had been exacerbated by the economic downturn.

Dow's EG capacity at Wilton was 275,000 tonnes/year and its EO capacity 320,000 tonnes/year, according to the ICIS plants & projects database.

($1 = €0.71)

With additional reporting by Caroline Howard

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By: Heidi Finch
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