EPCA ’19: Europe ACN players to change focus as INEOS mulls Seal Sands closure

LONDON (ICIS)–News from INEOS regarding the potential closure of its acrylonitrile (ACN) Seal Sands, UK plant may prompt market participants to change tack as they look at requirements for the year ahead.

– Security of supply in 2020 questioned

– Market starts to absorb news of potential Seal Sands closure

– Alternate contract pricing mechanisms mulled over by some

Producers and consumers typically discuss market dynamics at the European Petrochemicals Association (EPCA) annual conference, which starts on Sunday, but INEOS Nitriles’ news earlier on Thursday about a potential closure at Seal Sands will now be the focus.

The company said it had invested €200m in the past 10 years in the effort to get the 280,000 tonne/year ACN site operating in a safe and economical way.

Following a year of production issues and a force majeure declaration that has been in place since February, the latest news is likely to send shockwaves through the market for those customers affected.

If a closure is finally decided, the absence of this site would take a little over 30% of European production out of the market.

There were already a variety of production issues in Seal Sands in the first half of 2018, with a force majeure mid-year, but since the start of 2019, the plant has limped along, facing one technical issue after another.

BELEAGUERED PLANT
There was unplanned issue in February, resulting in the force majeure declaration.

Production was resumed in the second half of March, but within a few days further issues were encountered and the restart had to be aborted.

The start-up process took place early in April, but full rates were not achieved and the declaration remained in place.

Planned maintenance then took place at the end of July and problems occurred at the intended restart date at the end of August and has been out of production since.

Earlier in the week a sources noted that there was unlikely to be any production in October and this news alone was still be absorbed by customers.

In terms of other northwest European production, INEOS has another 320,000 tonnes/year of production in Germany and Anqore operates at 285,000 tonnes/year site in Geleen, The Netherlands.

CONTINGENCY PLANS
There were some customers that had still been awaiting news about allocation rates out of Seal Sands for October. This latest announcement is likely to start a flurry of discussions about where the material will come from in an already tight market.

In addition to the latest news, Seal Sands site is scheduled to have its five-yearly inspection in Q1 2020, which would take the plant down for further one to two months.

The news is now likely to dominate talks as players put into place contingency plans for supply and look to source material from elsewhere.

There will inevitably be impact and repercussions on the ACN market, both up and down the chain, but it is too early to assess the severity of these.

Prior to this announcement, part of the talks at EPCA were due to centre around potentially new pricing mechanisms moving forward.

Contracts are currently negotiated by following the movement seen in feedstock propylene and to a lesser extent ammonia.

It is then the delta change that is quoted and confirmed from buyers and sellers, not absolute numbers.

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There are intentions from some to stop this process and move to a contract mechanism that accounts for the feedstock price plus an adder fee, which is a process already used in some other petrochemical markets.

The reaction to these proposals is mixed and in the early stages and it remains to be seen if the announcement from INEOS will now dominate talks likely to take place on the sidelines at EPCA.

ACN is used in the production of synthetic fibres for clothing and home furnishings, engineering plastics and elastomers.

The EPCA annual meeting runs in Berlin on 6-9 October.

Pictured: INEOS Nitriles’ Seal Sands facilities
Source: INEOS

Focus article by Jane Massingham