Borealis issues force majeure declaration for Swedish steam cracker

London — Austrian-based petrochemical producer Borealis last week issued a force majeure declaration for its Stenungsund steam cracker in Sweden, the company told S&P Global Platts Tuesday.

"On 8 April 2020 Borealis had to ... declare force majeure (FM) for its cracker operations in Stenungsund, Sweden as a consequence of a technical incident. Affected customers have been informed of potential reductions of delivered volumes. At this point in time we do not know when the FM will be revoked," a company spokesman said.

Borealis' cracker in Stenungsund can produce 625,000 mt/year of ethylene. The company's other cracker in Porvoo, Finland, can produce 400,000 mt/year of ethylene. Both crackers are able to process a mix of feedstocks including liquids, LPG and ethane.

Last week, Borealis said it had lowered its steam cracker operating rates.

"Our steam crackers are ... operating at reduced rates due to Covid-19 impact as overall demand is lower," Borealis said, without giving further details.

Resin converter sources said that both the Borealis FM and other refinery and cracker run rate reductions had impacted production of key polyethylene grades used in the supply of resin to key flexible packaging used in the food, pharmaceutical and hygiene segments, where demand has been strong since March due to the coronavirus pandemic.

The refinery and cracker operating cuts were introduced in the aftermath of the collapse in the oil price and the coronavirus lockdowns across Europe, which conspired to tighten the supply of products such as plastics, and some producers of these resins have seen more limited supplies as a result of the production cuts in place up the supply chain, sources said.

Cracker output is being limited, a polymer trader said Tuesday, as is refinery output. "First of all, naphtha will be reduced ... If you don't produce gasoline. If you reduce gasoline in general by 25-50% I think its a good time to buy [cracker products such as PE resin grades]. I think that there will be some bottlenecks from some refineries and polymer plants [as a result]", the trader said.

The trader said he had seen reductions in his supplies of low and linear low density PE and "was asked to wait until the second half of April, and they have to keep [them] for other applications/medical buyers. They have cut allocations to 50% and are now struggling to get the other part in the second half of the month, which shows me that supply is tight."