Supply Chain Alert: Dow's European Plant Faces Major Setback, Disrupting Yearly Orders

Europe: Dow Chemical Europe Ltd. has announced a sudden force majeure for all Polyether Polyol products that contain Ethylene Oxide (EO). The force majeure affects Dow's plants in Temeuzen, Netherlands and Tertre, Belgium due to an unforeseen plant failure related to EO production. As a result, the supply of EO to polyols is disrupted, causing a ripple effect on the production of EO-containing products. The force majeure is expected to continue until the end of October or potentially impact annual orders.

Dow has notified its customers via letter to reach out if they have any queries. The company's Netherlands plant declared force majeure on October 2 for the manufacturing of Polyether Polyols containing EO, as the supply of raw material EO was disrupted. The supply has been restored as of October 7, but due to the backlogged orders, the force majeure is expected to persist until the end of October.

Ethylene Oxide is a vital component for organic synthesis and a key downstream product of ethylene. It has multiple applications, including the production of Ethylene Glycol, non-ionic surfactants, Polyether Polyols, Ethanolamines, Ethylene Oxide Ethers, Polyamines, Hydroxyethyl cellulose, Choline Chloride, and specialized liquids. These applications are widely used in various industries such as washing, printing, and dyeing, electronics, medicine, pesticides, textiles, papermaking, automobiles, oil exploration, and refining.

The leading refined Ethylene Oxide producers worldwide consist of various companies including Sinopec, PetroChina, Dow, Shell, BASF, INEOS, Huntsman, Liaoning Aoke, Sanjiang Chemical, Far Eastern United Petrochemical, and others. Notably, Dow holds a significant production capacity of 990,000 tons per year, making up 8.25% of the global major Ethylene Oxide producers. However, at the start of 2021, Dow faced force majeure circumstances, which could potentially impact the supply of Ethylene oxide, Polyether Polyols, and the chemical market. This event has caused some degree of concern and panic.

Despite the recent tight supply of Ethylene and high prices, the trend of Ethylene Oxide remains stable. Ethylene Oxide manufacturers are facing high-cost pressures due to these factors as well as recent accidents at Yangzhou Oak, Zhongke Refining and Chemical, and Taixing Jinyan. Some companies may temporarily relieve pressure by expanding their warehouses. However, there is a trend of price cuts in central and northern China due to stocking off-season and environmental factors. Although Dow's production has been interrupted, Ethylene Oxide may experience a small rise in the short term.

During the epidemic, transportation of Ethylene Glycol was stopped, but it began to rebound in December 2020 due to increased demand. Today, January 4th, the spot price of Ethylene Glycol in East China reached 4,490 Chinese yuan/ton, marking a 100 Chinese yuan/ton increase from before New Year's Day.

Despite the reduction in environmental protection production downstream resulting in a potential drop in demand, many Ethylene Glycol plants are still operating at low capacity. As a result, it is expected that Ethylene Glycol prices will remain high in the short term.

On January 4th, Dow's soft foam Polyether supply was tight, causing an increase in the latest guidance price of 200 Chinese yuan/ton to 20,000 Chinese yuan/ton in East China. Soft foam loose water in South China is currently priced between 19,500-20,000 Chinese yuan/ton. It is anticipated that the supply of Polyether will remain inadequate in the short term, leading to a strong upward trend in pricing.

The start of 2021 has brought about the first wave of profits. However, the year is witnessing frequent bouts of cold air which have led to an inevitable surge in freight rates. As major manufacturers continue to reap benefits and new policies take shape, it is imperative to keep a close eye on the latest trends in this regard. It would be wise to stock up in advance as per your requirements.