Chevron Phillips Chemical declares force majeure on polyethylene supply

Chevron Phillips Chemical has declared a force majeure on polyethylene supply, it said in a letter to customers Monday. A copy of the letter was obtained by Platts.

The move comes a week after a fire at the company's Port Arthur plant injured two workers and caused a steam cracker offline. Chevron Phillips Chemical on Friday told customers the shutdown was affecting its ability to supply ethylene and it was declaring a "contingency on all ethylene sales."

No timetable has been announced for a restart of the 830,000 mt/year steam cracker.

The company said in Monday's letter that it was still in the process of evaluating how long any polyethylene allocations would last.

"Please be assured that CPChem will work diligently to minimize the impact of this event on your business and return to full polyethylene deliveries as soon as possible," the letter said.

The US PE market has already been talked tight in recent weeks, with multiple production and supply issues from several producers said to be limiting product availability. Fellow US producer Equistar last week declared a force majeure for polyethylene from its Matagorda and Victoria, Texas, plants, citing feedstock supply disruptions.

Multiple industry sources have said the issues would likely result in flat domestic contract settlements for July, despite some calls from buyers for decreases earlier in the month.

For June, high density polyethylene contracts were assessed for blow molding at 83-84 cents/lb ($1,830-1,852/mt) delivered-rail car basis; 83-84 cents/lb ($1,830-1,852/mt) for injection; and 86-87 cents/lb ($1,896-1,918/mt) for HMW film.

Low-density polyethylene contracts were assessed at 92-93 cents/lb ($2,028-2,050/mt) delivered-rail car basis and linear low-density polyethylene contracts were assessed at 79-80 cents/lb ($1,742-1,863/mt) delivered-rail car basis.

The issues have also made it more difficult for traders to secure product for export, sources said.