CORRECTED: Formosa declares force majeure on US suspension PVC resins

27 July 2017 18:26 Source:ICIS News

Correction: In the story headlined “Formosa declares force majeure on US suspension PVC resins” dated 27 July 2017, please read in the headline and lead as … suspension PVC resins … instead of … specialty. The story is also being recast with a paragraph to specify the affected grades. A corrected story follows. 

Formosa Plastics USA has issued a force majeure for some suspension polyvinyl chloride (PVC) resins for August, market sources confirmed on Thursday.

The affected grades are general purpose resins that are used in rigid calendering, blow moulding and injection moulding, rigid sheet, bottles and siding, along with others.

The company cited the ongoing mechanical issue at its vinyl chloride (VCM) plant in Point Comfort, Texas, that has reduced output of derivative PVC.

“This event is causing a reduction in our production of Formolon 608, 614, 616K, 622R and 622S PVC resins,” the company said in its letter to customers, declaring force majeure/excuse of performance for the products.

It said the force majeure would run for "at least the next several weeks".

The company last week informed market participants that it would not allot material for August export, including to Mexico, because of the VCM production slowdown.

One market participant said that the overall impact of the force majeure will be limited, though some domestic customers will likely be forced to scramble to find supplemental volumes. That could put upward pressure on domestic spot prices, which have been soft in recent weeks.

The force majeure does not affect delivery of pipe-grade material, a market that consumes about 33% of US domestic sales, according to figures from the American Chemistry Council using data compiled by Vault Consulting.

US export volumes have been curtailed slightly for most months since April on rising domestic demand, planned maintenances and unplanned outages.

The lower export volumes have been offset by slightly weaker demand for global exports in various markerts for a number of reasons, including poor economic conditions in Argentina and Brazil, a new tax structure in India that requires more cash up front for transactions, and mixed conditions in China, which has been exported more PVC.

Formosa’s lack of exports to Mexico may put upware pressure on domestic prices there and reduce exports from the domestic producer there, markert participants said.

US PVC spot export prices have been heard this week in a wider range of about $820-875/tonne FOB (free on board) US Gulf. The ICIS assessment of spot export prices on 21 July put the range at $825-845/tonne to describe the main flow of business.

Major US PVC producers include Shintech, Occidental Chemical, Westlake Chemical and Formoda Plastics.

By Bill Bowen