Formosa Plastics Corp. USA has placed force majeure sales limits on polypropylene resin made at its plant in Point Comfort, Texas.
In an Aug. 8 letter to customers, officials with Formosa in Livingston, N.J., said that the firm "has experienced unexpected operational difficulties" at that plant. As a result, Formosa has declared force majeure on its Formolene-brand PP resins.
"Our teams are evaluating the impact of this event on our ability to produce and supply material," officials said. "We understand the burden that this will put on your company and Formosa is making every effort to return back to normal production as quickly as possible."
Market sources told Plastics News that Formosa is using a three-month average of purchases for their customers and affixing it at 100 percent, meaning they plan to meet all customer requirements, based on their three-month average.
Sources added that the outage is expected to last about two weeks. A second Formosa PP unit in Point Comfort will be down for scheduled maintenance beginning Aug. 15. That outage is expected to last six to eight weeks, sources said.
Formosa is believed to have built up PP resin inventory in advance of these outages, sources said, but the outages still could have a tightening effect on North American PP supplies, which already were tight in June and July. That tightness and higher prices for propylene monomer feedstock sent North American PP resin prices up 6 cents per pound in July after rising 1 cent in June. Market sources said that an increase of less than July's 6-cent move is possible for August.
North American PP demand is down about 5 percent so far in 2020, due in part to a drop of about one-third in sales to the automotive market. Most global auto plants closed during the COVID-19 outbreak.
Other markets, including exports as well as housewares and caps and closures, have seen improved demand, owing in part to consumers spending more time at home during the pandemic. Medical uses, such as N95 face masks, which are needed to protect health care providers, also have led to increased PP demand.
North American PP supplies were improved in late June, when Braskem SA completed construction of a new 1 billion pound-per-year PP resin plant in La Porte, Texas. That plant has worldwide export capacity.