• Labor dispute at chemical maker INEOS impacts Europe’s acetone and phenol production

    18 February 2020

    For more than a month, workers at chemical company INEOS, the world’s largest producer of phenol and acetone, have been on strike, disrupting production at its Antwerp plant and forcing the company to declare force majeure. The strike started on January 9 and entered into its sixth consecutive week on February 14.

    The company produces about half of Europe’s acetone and phenol supply, both of which are critical organic compounds used in industries such as electronics, automotive, and pharma. As a result, the strike has started to pose challenges for the chemicals’ supply chains in the form of reduced capacity and higher prices.

    Strike starts over dismissal of unionized staff

    The strike at the plant in the Belgian port city of Antwerp, one of the key petrochemical clusters in Europe, began following the dismissal of a representative of the General Confederation of Liberal Trade Unions (ACLVB) who previously pointed out the lack of safety at the plant. Shortly after, about 160 workers decided to cease all activity at the plant. During the following week, a meeting between management and union representatives failed to find common ground, forcing INEOS to declare force majeure on January 14. A second reconciliation meeting on January 24 also failed to bring both sides closer to an agreement. In mid-February, the strike entered into its sixth week. Latest reports state that three unions participating in the strike have been divided over the action, as members of the Confederation of Christian Trade Unions (ACV) have shown their willingness to work on Monday, February 11. As of February 17, negotiations are still ongoing.

    Auto and pharma reliance on intermediates of phenol and acetone

    According to the chemical database ICIS, INEOS manufactures up to 680,000 tonnes/year of phenol and 500,000 tonnes/year of acetone at its plant in Beveren, Antwerp. In Europe, phenol is primarily used as an intermediate in organic synthesis, essentially serving as a raw material for the production of bisphenol A (BPA), phenolic resins, cyclohexanone, alkyphenols, and salicylic acid. These intermediates have end uses in the automotive, electronics, and pharmaceutical industries.

    Acetone is mainly used for the production of methyl methacrylate (MMA) and bisphenol A (BPA). MMA has final applications in the lighting and consumer electronics sectors. Acetone can also serve as an intermediate in solvent applications, which are largely used in the manufacturing of pharmaceuticals.

    The table below outlines the main industry applications of these organic compounds:

    One of the main derivate of both products is BPA, which is typically connected to polycarbonate (PC) – a thermoplastic material used in the automotive, construction, and consumer electronics sectors – as well as epoxy resins. BPA is used in a wide variety of industries such as paint and coatings, automotive, aerospace, and shipbuilding.

    Outlook

    As of February 17, the labor dispute at the INEOS facility in Antwerp is yet to be settled, with production remaining halted until further notice. INEOS is a major player in the global phenol and acetone market: its units in Antwerp and Gladbeck, Germany (which remains unaffected) represent around half of Europe’s acetone and phenol production. Therefore, a prolonged disruption is likely to impact supply capacity and spot market prices. Due to its usage in a wide range of derivative products, limited availability is likely to primarily affect derivative manufacturers For instance, the Europe bisphenol-A (BPA) market has already experienced a price uptick amid reduced domestic supply and higher price offers from the Asian market.

    While the exact mid to long-term impact of the disruption remains unclear, serious supply shortages stemming from an even longer shutdown is unlikely. In 2018, a 2-month long force majeure declared at INEOS’ Antwerp and Gladbeck sites due to low water on the Rhine River did not cause any notable downstream supply shortages and production adjustments on the customer side. Among alternative supplies of both acetone and phenol in Europe are INEOS’ unaffected site in Gladbeck, as well as other firms like CEPSA Quimica, Polimeri Europa, Borealis Polymers, Novapex, and Domo Caproleuna.

    Customers relying on phenol, acetone, BPA, phenolic resins, and other related products in manufacturing processes in Europe should nevertheless keep abreast of the situation in Antwerp as additional maintenance downtime at other suppliers may lead to further price increases and potential capacity shortages.

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