UpdateFrance strikes may cause major chems production issues

06 October 2010 16:17  [Source: ICIS news]

(adds industry response throughout)

By Libby George and James Mills

The Fos/Lavera oil hub in FranceLONDON (ICIS)--The French port strikes could seriously affect some chemicals production and global availability if they carry on for much longer, industry sources said on Wednesday.

“It is of course – it could be – a major impact,” one French producer said, while noting there had not yet been adverse effects. “It’s a very bad sign for the French economy…and very bad for the global and French petrochemicals industries.”

Earlier on Wednesday, strike action at the Fos-Lavera oil terminal in southern France was extended for a further 24 hours.

It was unclear how long was too long, but market players from a variety of industries were warily watching the progress of the 10-day strike, which sources were now speculating could last until the end of the next general strike on 12 October.

“For sure, that would make a difference,” one trader said of another strike extension. “The problem is, you never know how long such things will last…it could be a day, it could be a fortnight.”

While the inability to export cargoes was troubling, the larger impact could come from the lost feedstock, such as crude oil, which is essential to running crackers at full rates. If that production was shuttered or slowed down, it could have a knock-on effect on a variety of products further downstream.

“They need the Brent to run the cracker,” the producer said. “And if they can’t get the Brent, they can’t run the cracker. I would have to shut down my [downstream] unit.”

Market players in downstream industries with tight or balanced-to-tight availability – such as oxo-alcohols – said any such shutdowns could be felt immediately on the market.

“Material is not freely available,” one trader said. “That’s why the guys in the Far East are pretty desperate.”

Prices for n-butanol (NBA), isobutanol (IBA) and 2-ethylhexanol (2-EH) rose higher last week by $20-60/tonne (€14-43/tonne) on the back of availability concerns to $1,520-1,550/tonne CFR (cost and freight) NE (northeast) Asia, $1,520-1,550/tonne CFR East Asia and 1700-1740/tonne CFR East Asia, respectively.

In Europe this week, sources expected prices to be largely stable. But if any production is lost in the coming month – particularly of the tighter 2-EH molecules – prices could increase significantly. However, as of Wednesday, French production had yet to be affected by the strike action.

“It could definitely have an impact on the total scenario,” a trader said. “But I think they have a plan.”

French oil industry association UFIP said earlier that supplies of crude oil to four refineries near Fos-Lavera, which account for one-third of France’s refining capacity, had been interrupted.

Three inland refineries are connected to the port by pipeline and depend on it for crude oil supplies. The association said that the refineries could continue to run for two to three weeks on existing crude oil stocks.

There are 24 chemical plants in the immediate vicinity of the port, according to the ICIS plants and projects database. None of the plants are known to have shut down as a direct result of the strike.

Shortages of diesel have been reported in Corsica, where officials were arranging an emergency delivery from a refinery in Sardinia, but supplies of fuels and other oil products to other parts of France have not been affected.

French media reports suggested that workers at the refineries and chemical plants might join the port workers’ strike.

($1 = €0.72)

To discuss issues facing the chemical industry go to ICIS connect

By: Libby George
+44 208 652 3214

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