BASF confirms FMs on naphtha, C2 and C3 offtakes, declares two more

19 October 2016 16:15 Source:ICIS News

BASF Ludwigshafen cracker II

(adds BASF's confirmation of force majeures)

LONDON (ICIS)--BASF confirmed on Wednesday afternoon it has declared force majeures on offtakes of ethylene, propylene and naphtha at its Ludwigshafen site after a fire on 17 October halted logistics, according to a spokesperson for the German chemical major on Wednesday.

Meanwhile, two sources in the European petrochemical industry said force majeures had also been declared in acrylic acid (AA) and monopropylene glycol (MPG) at Ludwigshafen. BASF had not responded to requests for comments on the latest news at time of publication.

In a written response to ICIS, BASF confirmed the two steam crackers at Ludwigshafen, with a combined capacity of 620,000 tonnes/year, remain closed due to the interruption of raw materials deliveries.

“Against this background, we confirm that BASF has declared force majeure for the offtake of naphtha (RMR [pipeline connecting with] Rotterdam), the offtake of ethylene (EPS [Ethylene Pipeline Sud] pipeline) and the offtake of propylene (pipeline Ludwigshafen – [MIRO’s refinery in] Karlsruhe),” said the spokesperson.

Earlier on Wednesday, a source at the company said: “We declared force majeure yesterday [18 October] for different things.”

The company source explained that although the incident did not have a direct impact on either of the crackers’ ability to produce, the restriction on cracker feedstock deliveries had resulted in their shutdown.  

“It’s still not clear what happened and when they will be back on-stream, there are millions of rumours but there is no clear view,” it added.

Chemical analyst Oliver Schwarz, from Germany’s Hamburg-based Warburg Research, said the force majeures in some logistics operations into and out of Ludwigshafen were to be expected.

“As long as they cannot be sure that the structural integrity of their supply pipelines has not been compromised, they need to remain shut down, thus triggering the force majeure,“ he said.

On Wednesday at 13:00 London time, however, BASF said the still-missing worker had been found dead in the River Rhine. The authorities had already said on Tuesday evening it was likely the explosion had thrown the worker into a nearby harbour area.

“Unfortunately we have to assume that our fears have been confirmed and there is a third fatality to mourn. Our thoughts are with the relatives and the other injured people. Together with all colleagues at BASF we have held the victims in a minute’s silence today," said Margret Suckale, member of the company's board.

The last fatality has brought the death toll from the accident up to three while eight people were seriously injured and another 17 suffered minor injuries.

The company shut down its two steam crackers at the site on Monday while around 20 other chemical plants were also closed or partially running. BASF did not detail the plants or products affected.   

Since the accident, several sources in the European petrochemical markets have said it was too early to assess the impact the accident could have on their operations.

Given the importance of Ludwigshafen as a buyer and distributor of several chemicals both in Germany and in the wider EU, it is feared a prolonged outage could bring havoc to the industry in Europe.  

European naphtha sources said on Tuesday any potential reduction in naphtha sales to the BASF Ludwigshafen petrochemical complex in Germany is contingent on when the two steam crackers at the site restart.

Immediately after the accident, BASF shut down its two steam crackers at the site and halved naphtha imports.

BASF’s Ludwigshafen steam crackers process about 2m tonnes/year of naphtha, which is transported to the site by ship and pipeline.

Benzene and styrene sources in Europe said on Tuesday that spot markets for both products had seen some movement following the fire and the closure of crackers.

“Benzene is going south,” said one source. "Styrene is continuing to climb higher."

Globally, the styrene market was also affected by another fire in the US at Westlake Chemical’s plant in Louisiana on 14 October, as well as a styrene outage in Kuwait.

A source from BASF said on Monday that operations for production of polyacetal (POM) were running normally following the accident.

Earlier on Wednesday, Warburg Research’s Oliver Schwarz said he expected logistics to be affected after the accident but said it was unlikely production would suffer.

Schwarz said the fire at the harbour would deprive BASF of the key transportation route of the River Rhine, used for barges delivering raw materials into the site or the company’s own shipping of commodity chemicals to other facilities.

He added the impact at Ludwigshafen from a closed harbour could be significant but pointed to the company’s remaining alternatives to transport materials – pipeline, railroad and lorries.

“Supply [into the site] with raw materials and shipping of commodity chemicals might be significantly impacted, at least for several weeks. It remains to be seen if BASF can implement workarounds in regard to logistics and/or has enough chemicals stored on site to bridge a temporary shutdown of the harbour facilities,” he said.

“Again, I would not expect the situation to last for several months as BASF is likely to have contingency plans at hand and it still has three more methods of transportation.”

Schwarz was less pessimistic regarding production than analysts at Germany’s Baader Bank, who on 18 October said BASF’s annual earnings in 2016 might be negatively affected by as much as 3% due to the fire, adding the closure of the two steam crackers and shutdowns or reduced operations at other plants may last three months.

He also pointed at how logistics turnarounds are normally quicker to fix than those at production plants. In that sense, he added, the containment of the crisis to the harbour area will greatly help BASF get back on track.

“However, after having seen footage and talked to the company, I am quite sure that the damage is only in the harbour part of the site, thus no production facilities were severely damaged.

Given that workarounds for logistics are normally easier to do than fixing production facilities, I would be quite surprised if the incident would cause major facilities like the steam cracker to remain offline for several weeks, let alone months.”

Although the declaration of force majeures in logistics would dispel potential production outages in the long term, the chemical analyst at Warburg Research said production problems at Ludwigshafen would be a positive development for BASF’s competitors in Europe and overseas, who will see increased demand for a number of products.

“If BASF has to declare force majeure on its crackers and/or parts of its downstream production facilities, this will affect availability of chemicals in the European market, driving prices up, at least temporarily,” said Schwarz.

"However, any production gap should lead to higher imports from elsewhere (North America, Asia) or/and in a higher capacity utilisation at competitors - BASF problems might turn into other chemicals producers boon.”

Picture above is BASF's No II cracker at Ludwigshafen.
Image source: BASF

Additional reporting by Jonathan Lopez, Cuckoo James, Truong Mellor, Heidi Finch and Katherine Sale, Nigel Davis

By Nel Weddle