US polyvinyl chloride (PVC) producer Shintech has had reduced PVC production at its Freeport, Texas, plant since March, with no immediate end in sight, amid an ongoing dispute with Olin, its vinyl chloride monomer (VCM) supplier.
VCM is the immediate precursor to PVC, and Olin supplies VCM to Shintech under contract via a 1.3-mile pipeline connecting the two companies' plants in Freeport. According to legal filings, 50pc of the VCM supplied to Shintech's Freeport PVC plant comes from Olin, while the other half is supplied by Shintech's Plaqueimine, Louisiana, site.
The two companies have been in the process of resolving various disputes regarding their mutual VCM contract, in which Olin claims they are owed compensation from Shintech for the 2022 VCM contract. For its part, Shintech has argued against Olin's limits on VCM supplies during the ongoing resolution process, as Olin initially said it would withhold supplying VCM until the matter was concluded. In a lawsuit, Shintech claimed the current shortfall in VCM was doing significant damage to its PVC production.
Shintech this week said that Olin has since agreed to provide full contract volumes pending the conclusion of the legal proceedings. However, Olin has not actually done so thus far, with the company citing ongoing operating issues following a turnaround at its VCM site in Freeport. Olin in June stated the planned maintenance at its Freeport VCM plant required an extension of roughly seven weeks and resulted in additional costs being incurred. For now, the VCM plant has returned to operations at a reduced rate.
Shintech said it was not sure when Olin would be able to resume full operations again. In the meantime, Shintech is providing some additional VCM to its Freeport plant from its site in Plaquemine. However, in its legal filing, Shintech stated this would not cover the loss of supply from Olin, and as a result its Freeport PVC plant is operating at reduced rates.
Domestic customers have not reported any significant supply disruptions so far. Nevertheless, industry supply is not as long as it would be otherwise, given the lack of strong, consistent domestic demand. Days of supply in June was at 11.5 days, the second-lowest monthly total of 2023 so far, according to the ACC's Plastics Industry Producers' Statistics Group as compiled by Vault Consulting.
The export market has been affected more directly. According to the ACC, export volumes from producers fell to 158,992 metric tonnes (t) in June, roughly 29pc of all volume sales for the month and the lowest total in nearly a year. For comparison, PVC exports accounted for nearly 50pc of all sales back in December 2022.
Most recently, export prices returned to $700/t-$710/t fas Houston in July after hovering below $700/t for weeks. The main driver, according to multiple traders, was the relative lack of availability and activity from US producers. Formosa Taiwan's recent announcement of a $60/t increase to all destinations for August delivery also was partially dependent on less US material arriving in Asia.
Olin is not alone in their VCM operating issues. A number of other VCM plants along the US Gulf coast are also experiencing unrelated operating issues that are impacting supply and limiting the production of PVC.
Olin did not immediately respond to a request for comment.
