Total Suspends Refining Operations in Dunkirk, France

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Researched by Industrial Info Resources (Sugar Land, Texas)--Weak fuel demand has caused Total SA (NYSE:TOT) (Paris, France) to shut down the company's refinery in Dunkirk, France. The refinery has a production capacity of 137,000 barrels per day (BBL/d). As a response to the declining refining markets, the company has decided to suspend all operations at the refinery complex, which also houses a propylene plant with an output of 90,000 tons per year.

The shutdown process, to be effected over a few days, is expected to start on September 12. Company sources reveal that the refinery will resume operations only when market conditions become favorable. However, it remains to be seen whether the propylene unit at Dunkirk will be allowed to continue operations with already better-than-expected demand prevailing in the region.

Profit margins of cracker ventures in the region have been affected by the rising prices of naphtha feedstock, in addition to the decline in the demand for polyethylene, which is estimated to have fallen 18% compared to 2008 figures. In response, crackers cut back on production and were operating at about 75% capacity in order to bring down ethylene production, invariably affecting the production of propylene, a byproduct of ethylene production through the naphtha cracking process.

With several cracker units across Europe already being shut down, a few more going offline, and still others scheduled to be suspended for planned maintenance, the overall propylene market continues to remain tight, whereas the key downstream product polypropylene enjoys a steady demand. Demand for polyethylene has revived in the meantime, causing capacity utilization to be increased to 90% during the month of July. Europe's polyethylene and polypropylene manufacturers include SABIC Europe BV (Sittard, Netherlands), Total, Borealis AG (Vienna, Austria), LyondellBasell Industries (Rotterdam, Netherlands), Repsol YPF SA (NYSE:REP) (Madrid, Spain), and INEOS Group (Lyndhurst, United Kingdom).

Hampered cracker operations in Central Europe and Sweden at the LyondellBasell and Borealis facilities, respectively, have resulted in a severe shortage of high-density polyethylene (HDPE) during the last couple of months. However, the supply crunch was eased to some extent when production at Borealis's 625,000-ton-per-year plant in Stenungsund, Sweden, resumed. The facility is scheduled to undergo maintenance during September and October.

SABIC closed down an ethylene cracker unit in Wilton, England, in February, in the wake of declining markets and technical problems. The 865,000-ton-per-year unit has now been revived and is expected to house a new low-density polyethylene unit.

Closure of Borealis' polypropylene plant in Burghausen, Germany, and a force majeure at the Geel polypropylene plant run by INEOS in Belgium, have further compounded the shortage.

Total's Feysin unit in France is down on a nine-week scheduled maintenance, while the Lavera plant, managed by INEOS and Total, was running at 50% capacity until recently. The 550,000-ton-per-year INEOS unit in Rafnes, Norway, is faced with production problems, and Repsol's cracker facility in Puertollano, Spain, is scheduled for a maintenance shutdown.

Random outages continue to hinder operations at the cracker operated by Petkim Petrokimya Holding AS (IST:PETKM) (Izmir, Turkey) in Aliaga, Turkey. While problems have been resolved at the cracker units operated by Polimeri Europa SpA (Milan, Italy) in Priolo, Italy, and Dunkirk, an explosion at a 320,000-ton-per-year cracker at Carling-Saint-Avold, France, run by Total has caused operations to stop indefinitely.

Market research by U.K.-based Merchant Research & Consulting Limited (Birmingham) indicates that the global demand for polypropylene is expected to grow 6.9% through 2010, while consumption rates across Western Europe will only grow 3.3% this year. Current demand in Europe was down by 12% to 15% as of June.

Because of the substance's varied usage, eco-friendliness and pricing, polypropylene has an edge over competitors polyvinyl chloride (PVC) and polystyrene. However, an increase in propylene prices will affect product pricing.

Offline cracker capacity across Portugal, Germany, Eastern Europe and Belgium reflect the fact that demand is still low compared to 2008 levels, and reviving these units will not be economical at this juncture.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.