03 September 2010 12:54 [Source: ICIS news]
The force majeure is effective from 1 September and will put customers on 40% allocation for caustic soda and 70% allocation for PVC. The company expects the outage and force majeure to last for about 10 weeks.
“We will see what we can do in the next weeks,” a company source said. “If we see that we can buy additional chlorine from the market, we will try to increase the allocation or lift the force majeure earlier.”
The troubles began with an early July lightening strike that destroyed a transformer at the company’s Marl, Germany, facility. The company continued to produce with power from other transformers, but was forced to make the declaration when the back-up transformers failed earlier this week.
Customers were informed of the force majeure in letters on Tuesday and Wednesday of this week, while the company began negotiating purchases of chlorine feedstock in the form of ethylene dichloride (EDC) and vinyl chloride monomer (VCM).
The Marl plant has a nameplate capacity of 400,000 tonnes/year of PVC and 285,000 tonnes/year of caustic soda, according to ICIS data.
Already, the force majeure was reverberating on the markets. Sellers’ hopes for €20-75/tonne increases in September PVC prices were boosted by the unexpected troubles and many were now more confident in their negotiating power.
“Supply has been limited and now it’s even worse,” another PVC seller said, adding that it expected to get at least €40-50/tonne of its €60/tonne target.
Domestic prices for pipe-grade PVC are currently €1,050-1,070/tonne FD (free delivered) Germany, according to ICIS data.
Caustic soda sellers have been working to boost prices by €15-30/DMT, and at least three producers said they had been able to pass on increases to distributors on the tightening availability. Buyers in that market are yet to confirm the hikes.
Meanwhile, while most EDC sales have been concluded for September deliveries, some sellers now believe that prices will firm in October on the back of the stronger-than-expected demand.
“Assuming demand keeps going forward in October… the laws of supply and demand will kick in,” one EDC seller said.
EDC prices stood at $440-460/tonne FOB (free on board) NWE (northwest Europe) on Friday, according to ICIS data.
Demand has already been higher than usual on the back of other PVC outages, including at Polish producer Anwil’s chlorine plant. That company declared force majeure on PVC and caustic soda after the electrolysis unit was damaged by fire in June.
Other PVC producers include Vinnolit, INEOS ChlorVinyl, Shin-Etsu, Solvin and LVM.
($1 = €0.78)
For more on PVC, caustic soda, EDC and VCM visit ICIS chemical intelligence
For more on Vestolit and other PVC producers visit ICIS company intelligence
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