FocusOngoing supply constraints limit trade in Europe chlor-vinyls

06 March 2012 16:37  [Source: ICIS news]

By Abache Abreu

LONDON (ICIS)--Ongoing supply constraints and increasing domestic demand continue to tighten Europe’s chlor-vinyl markets, industry sources said on Tuesday.

Production outages in the vinyl chloride monomer (VCM), polyvinyl chloride (PVC) and upstream ethylene markets are limiting supply across the chlor-vinyl chain.

On the other hand, the start of the downstream construction season has led to a resurgence in buying interest, which has further tightened the market and led to price increases.

French specialty chemical firm Arkema’s VCM plant in Fos, southern France, is expected to resume production on Wednesday this week after a weather-related shutdown in February and failed restart attempt last week, a company source said on Tuesday. A subsequent force majeure declared on PVC supplies from its nearby Berre facility remains in place.

Belgian producer SolVin’s PVC facilities have now returned to normal operating rates after also being affected by cold weather, and a force majeure – which affected production of grades K70 and K57 at SolVin's Tavaux facility, in France, and all commodity grades at Jemeppe, Belgium – has been lifted.

However, SolVin is able to supply only limited quantities because of low stocks, a company source said on Tuesday.

Production at Spain-based Ercros’s 175,000 tonne/year PVC plant is back to normal levels after technical problems led to a two-day shutdown at the end of February.

The plant is now running normally, although the market in Spain remains tight, with little product available.

Some producers, including Japan’s Shin-Etsu and Germany's Vinnolit, have implemented strict allocation on PVC supplies because of low inventory levels and strong demand.

Further tightness is expected in the European market as several maintenance shutdowns are planned for March and April, coinciding with the start of the PVC and construction season.

Major chlor-alkali producer INEOS Chlor will have a four-week maintenance shutdown at its VCM plant at Rafnes in Norway in April.

Production at Shin-Etsu ’s PVC facility at Estarreja, Portugal, will be reduced for four weeks of maintenance during March and April.

The feedstock ethylene market in Europe has also tightened because of supply constraints, after a second unexpected outage, this time in the Netherlands, brought the number of official force majeure declarations on ethylene to two.

Shell Chemical has declared force majeure on propylene and ethylene effective 1 March, at its Moerdijk cracker in the Netherlands, following an increase in fouling in its cracker system.

The timeframe for the repairs is being assessed, with a clearer view expected by mid-March.

INEOS’s No 4 Cracker at Dormagen, Germany, remains off line following recent technical problems resulting in a force majeure declaration on propylene, ethylene and raffinate 1 at the site.

The unit unexpectedly went down on 17 February. Previous reports suggested the downtime would last for about 21 days. INEOS was not immediately available for comment.

There is talk of other ethylene supply constraints in Belgium, France and Italy but this could not be officially confirmed.

Tightness in the ethylene market has had an impact on the already-short chlor-vinyl markets, especially for those producers buying ethylene in the spot market.

“The ethylene market continues to tighten and the spot market is short,” a PVC producer said. “On the other hand, demand [for PVC] is good, as profile producers are in need of product, so we are staying very firm on our price targets for March”

Unexpected outages in the upstream ethylene market tend to have an impact on the chlor-vinyl market because of both cracker operators’ preference of keeping production levels closely aligned with contract demand, and the fact that most European PVC producers are not backward integrated and therefore buy ethylene from third parties.

($1 = €0.76)

Additional reporting by Nel Weddle

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By: Abache Abreu
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