Strikes in France Taking Toll
on EVA Buyers

While the French government works overtime to keep gas stations from running dry and cities powered after workers at oil refineries and nuclear plants walked off the job weeks ago, resin buyers are starting to feel the impact of material shortages.  According to the French chemical association UIC, at least 20-30 plastics converters in France were forced to close their plants due to shortages of materials, and the plastics industry could be losing around 10 million euros per day as a result of the strikes.
 
The strikes, which began in mid-May are in response to the controversial labor reforms of the “El-Khomri Law” the French government’s attempt to ease the unemployment rate by loosening union protections that make it too difficult for companies to fire workers, which discourages taking risks and hiring new staff.  Despite a relatively prosperous economy, France has an unemployment rate of more than 10%, around double most of its European counterparts. 
 
As of 31 May, the strikes in France were still ongoing, with six of the country’s eight oil refineries running at reduced capacity or completely stopped.  Total’s refinery in Feyzin (France) ceased production, with almost 80% of the site’s employees striking, and the supply of ethylene from the site’s steam cracker to nearby polymer plants was impacted.  As a result, PVC producer Inovyn declared force majeure on its vinyls and chlor-alkali products.  The strike has affected several crackers across the country, including Total’s Gonfreville refinery where production was completely halted, and INEOS’s refinery in Lavera.  On 24 May, Naphtachimie declared force majeure on ethylene production from its Lavera (France) site.  As many as 400,000 people joined the protests on 26 May, which expanded to include French nuclear power plants.  The strikes have led to shortages of feedstocks in France, and polyethylene force majeures were announced for Total’s Gonfreville site, INEOS’ Sarralbe site, and INEOS’ Lavera site.  Due to the significant impact the strikes have had on its operations, Total Petrochemicals may reconsider its investment plans in France.  Total’s CEO Patrick Pouyanné has threatened that its planned investments of 600 million euros to upgrade the Donges and La Mède refineries could be called into question.
 
Buyers of ethylene vinyl acetate (EVA) are reporting that resin availability was tight for May, and grew increasingly so as the month progressed. Many sources agreed that “only limited material was available.”  At the beginning of May, Versalis declared force majeure for EVA produced at its plant in Oberhausen (Germany).    The plant experienced a technical problem on 21 April and the outage “could last for some time.”  The LDPE/EVA swing plant on the site has an annual capacity of 140 kt.  In addition, Versalis’ production plant in Ragusa (Italy) has not resumed normal operations.  The outage in Oberhausen resulted in significant bottlenecks and “generated panic” among a number of buyers.  The impact of the Oberhausen outage was felt notably towards the middle of the month.  It was reported that film grade resins were especially tight.
 
Due to the nationwide strikes at French refineries which impacted ethylene supply availability, Arkema and Total announced force majeure on EVA resins on 24 May.  While this did not seem to have a major immediate impact, buyers have grave concerns about resin availability in June.  An industry player remarked that once the French crackers restart, it could still take 4-5 days before on-spec ethylene is available for EVA production.  One distributor noted that “the situation is becoming severe.”  One source commented that it was “surprising to see the Force Majeures in France happen so quickly” and that this indicates that producers are not holding very significant stock levels.  Suppliers unaffected by production issues experienced a surge of orders, especially in the second half of the month, but were unable to meet all of the unforecasted demand.  Some grades were completely sold out.  One distributor remarked that “Exxon’s availability was much worse than normal.” 
 
Even for producers without production issues, “strict allocations were in place” and stocks were limited.  The situation was particularly severe for small and medium-sized customers since producers focused mainly on their largest accounts.  Even players who were able to obtain all the material they needed in May are “expecting problems in the coming weeks.”
 
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