Operating problems and reduced ethylene feedstock supplies have led Georgia Gulf Corp. to declare force majeure on PVC shipments from its plant in Plaquemine, La.
In an April 14 news release, officials with Atlanta-based Georgia Gulf said that the unexpected reduction in production capacity is expected to last for the next few months. Operating problems at the site have reduced its effective production capacity by 33 percent. Ethylene shortness is being caused by a force majeure event at a major ethylene supplier, chemicals Executive Vice President Joseph Breunig said in the release.
Georgia Gulf declined to identify the ethylene supplier, but market sources said the supplier is Shell Chemical Co., which declared force majeure last month and recently placed its North American ethylene customers on allocation.
Operational issues at Georgia Gulf's Plaquemine site are being evaluated, and the length and cost of any needed repairs is being analyzed, officials added. The site's annual PVC capacity is estimated at almost 1.7 billion pounds. Georgia Gulf's other North American PVC production site is in Aberdeen, Miss., where annual production is estimated at almost a billion pounds; but that site also has been affected by raw material issues, spokesman Alan Chapple said in an April 15 phone interview.
The force majeure isn't expected to cause any layoffs at the plant, which employs almost 800 Georgia Gulf staffers and contract workers, Chapple added.
A more direct impact from Georgia Gulf's force majeure might come in the form of pressure on price increases nominated for PVC in the North American market place. Producers successfully raised prices an average of 3 cents per pound in March and now are pushing increases of 3 cents for April and 5 cents for May.
A lot of PVC makers already are running at close to 100 percent of effective capacity, said Nick Vafiadis, a market analyst with Chemical Market Associates Inc. in Houston. Georgia Gulf's force majeure will further tighten the [North American] market and bolster the case for the price increase in April, he added.
Vafiadis pointed out that U.S./Canadian sales of PVC into the export market remained heavy in the first quarter of 2011. Exports of PVC from the region grew 30 percent during that period, according to the American Chemistry Council in Washington, while domestic demand fell more than 4 percent, dropping overall market growth to around 6 percent.
In the April 14 news release, Georgia Gulf President and CEO Paul Carricio added that the recent force majeure won't affect the firm's first-quarter earnings. In 2010, Georgia Gulf's sales grew more than 40 percent to more than $2.8 billion, but profit fell almost 70 percent to less than $43 million. However, all of the firm's 2009 profit came from a positive debt exchange. Without the exchange, it would have lost more than $170 million in 2009.
Georgia Gulf generated more than 40 percent of its 2010 sales from PVC and related feedstocks. The firm also is a major producer of PVC-based building products and grew in that area earlier this year by acquiring a vinyl siding business from Columbus, Ohio-based Crane Group for about $72 million.