Spain chemicals plants to operate on special status amid generalised industrial shutdowns

Author: Jonathan Lopez


LONDON (ICIS)--Spain’s chemicals plants will continue working due to their status as critical infrastructure after the cabinet extended on Sunday industrial shutdowns for two weeks to contain the coronavirus pandemic.

The Spanish cabinet is hopeful the contagion curve could start flat-lining the week starting Monday 30 March, but argued it was putting the industrial sectors in “hibernation” to fully get a grip on the pandemic.

While workers in the services sectors are mostly working from home, most industrial employees continued to attend their workplaces in the past two weeks as the country started on 16 March a state of emergency aimed at curbing the pandemic.

“We want to reduce people mobility to the levels observed last Sunday,” said the cabinet’s spokeswoman, referring to 22 March, the first non-working day under the state of emergency.

The coronavirus pandemic has hit Spain hard. After Italy, it is the second worst affected country in Europe, with nearly 90,000 positives and more than 6,500 deaths.

Starting on Monday (30 March), non-essential industries will go idle and like most Spaniards their workers will be obliged to stay home, only allowed to leave for grocery and medicines shopping or a medical emergency.

The government said at this stage of the pandemic it was key to reduce the rate of infection, adding that in six out of 17 regions the emergency services were at limit and could not cope if infections continued at their current rate.

The next two weeks have eight working days in Spain as the country contemplates public holidays for Easter (9-10 April); employees’ mandated to stay home in the next two weeks will still get paid by employers, according to the cabinet’s decree, and workers will have to recover the lost hours by December.

Like most countries, chemicals are considered a critical infrastructure by the state given key essential end markets like water treatment, medical devices and food and drinks, among others.

This would mean that plants producing products like chlorine for water, advanced polymers for medical devices, or plastic packaging for goods and drinks will continue their activity; in the case of the latter two, output could even increase as their end markets currently are posting good demand.

However, the chemicals industry understands production for most chemicals will suffer a sharp decline in the second quarter as non-essential sectors have come to a standstill in most of Europe due to generalised quarantines across the region to contain the pandemic.

The director general at Spain’s trade group FEIQUE told ICIS on Sunday he could not detail about the loss of demand for certain sectors as he represented the industry as a whole.

“One thing is to shut after a mandate from the government; another is to shut because of the lack of demand,” said Juan Labat.

Germany’s chemicals major BASF, with important operations in Spain, already said at the start of the state of emergency that orders from the automotive sector – which enters now its third week of shutdown in practically all European countries – had fallen.

It is estimated that around 20% of chemicals end up in the automotive sector, of which Spain is the second largest producer in Europe after Germany, according to ACEA, the EU’s trade group representing the industry.

The construction industry – another chemicals-intensive sector – will come to a halt in Spain on 30 March for two weeks.

The EU’s trade group FEIC representing construction companies has asked the European Commission – the EU’s executive body – to declare a “force majeure status” in the industry as several logistics issues or disruption to supplies are impeding activity.

The trade group argued that external factors were placing corporates at risk of breach of contracts; a special status would legally protect them against that.

The toll from the pandemic on the Spanish economy is expected to be large; like in Italy before it, Spain’s health service was overwhelmed as the coronavirus contagion rate jumped in a matter of days.

On the day the country’s Prime Minister Pedro Sanchez announced a stimulus package of up to €200bn, mostly credit lines with state-backed guarantees, he adopted a sombre tone as the country’s downturn could be very pronounced.

Arguing the stimulus package was only the mechanism to go through the pandemic, he added that soon after the “social and economic reconstruction” of Spain would take place.

On Saturday (28 March), announcing the extended industrial shutdowns, Sanchez’s rhetoric had not changed.

“These measures will reduce mobility even further, reducing the contagion risk and allowing to relieve the pressure on the health service. Corporates and trade unions are aware of the big efforts we need to undertake now to defeat coronavirus,” he said.

“They are also aware of the reconstruction effort that will come after the pandemic. I hope we’ll see the effect of these measures in coming days … That will mean fewer people infected and fewer people in hospitals. In the meantime, I can only offer sacrifice, resistance, and a moral of victory.”

Front page picture: A woman crosses an empty street in Barcelona on 22 March; Spain's initial two-week state of emergency has been extended to 12 April
Picture source: Andreu Dalmau/EPA-EFE/Shutterstock

Focus article by Jonathan Lopez