Refinery strikes shutter over a quarter of France C3 capacity

23 February 2010 14:28  [Source: ICIS news]

By Nel Weddle

Total strikes shutter over a quarter of France C3 capacityLONDON (ICIS news)--Total’s refinery strikes have shuttered around 36% of France’s total propylene capacity, according to ICIS pricing data, exacerbating an already tight supply and demand balance, market sources said on Tuesday

Propylene-producing fluid catalytic crackers (FCCs) at all five operational French refineries run by Total  – Grandpuits, Donges, La Mede, Gonfreville, Feyzin and Dunkirk – were down as a result of the strike.

The sixth refinery – Dunkirk – had been idled since September and was the root cause of the union action.

Market sources said they assumed that the steam cracker linked to the Feyzin refinery had also been closed. Total was reported to have declared propylene force majeure at some of the sites, but this was not yet confirmed directly.

Players in the European propylene market were trying to assess the impact on supply and pricing.

“Various scenarios are possible I think from short to really short” said a trader.

“[I] didn’t think it could get any tighter” a major integrated consumer said.

Traders said that they were looking at various import opportunities, but this was difficult.

“[It's] not so good…[there is] not much around,” said another trader.

There were no clear indications regarding spot prices, which had last been assessed in the low-to-mid €900s/tonne ($1,260-1,280/tonne) CIF (cost, insurance and freight) NWE (northwest Europe).

Some sources said that prices would be most definitely higher but largely theoretical since there would be no free volume.

March contract discussions were also ongoing on Tuesday. Sources said that the refinery strikes were having a double whammy effect on propylene by affecting upstream crude and naphtha prices as well as propylene availability itself.

“I would assume that it [the impact] is included in the MCP [monthly contract price],” a source said.

An increase from the February’s settlement at €875/tonne was widely anticipated even before the latest constraints on supply, although the upswing had been expected to be more modest than last month’s €85/tonne. Now, some contract players were revising their ideas.

Given the issues in France and also talk of production problems at crackers in Germany and in the Netherlands, contract discussions were going to be difficult, sources said.

“Our customers are shocked, they are still trying to put [forward] their old strategies,” said a large producer, adding that the old arguments were no longer valid.

“These unexpected events will have some knock-on effect [on the discussions],” another major producer said.

Market sources were still hopeful for a settlement before the end of the week.

Around 7,000 direct employees, suppliers and subcontractors at the refineries went on strike for 48 hours last Wednesday to demand a restart of the petrochemical giant’s Dunkirk site, which has been idle since September and was likely to be closed down.

However last Friday, employees voted for open-ended strike, which was now threatening to engulf the majority of France’s propylene capacity since unions had called for solidarity from ExxonMobil and INEOS refinery employees.

INEOS’ refinery in Lavera, France, has continued to operate as normal so far. Richard Longden, group communications manager at the company, said that discussions with unions had taken place but there had been no industrial action.

ExxonMobil said there had been no disruption at its facilities. “All the refineries are running as normal for the time being,” a spokesperson said. A walkout at ExxonMobil would affect its 80,000 tonnes/year FCC at Fos in southern France.

LyondellBasell and oil refiner Petroplus, which run a refinery each in France, were also unaffected.

($1 = € 0.73)

Franco Capaldo contributed to this story
For more on propylene visit ICIS chemical intelligence
For more on Total Petrochemical visit ICIS company intelligence
Click here to find out more on the European margin reports
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By: Nel Weddle
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