The spread of the US supply problems to Europe is an indication of how much US polymer has been moving to Europe and how dependent the region has become on US material. This is not evident in publicly traded deals, as most, if not all f the material moving is on contract and intra-company (Dow moving to Dow’s customers, ExxonMobil to their customers, etc). But the production shortages in the US have impacted customers in each region.
Source: Bloomberg, C-MACC Analysis, March 2021
Separately, the permanent shutdown of the Versalis ethylene facility in Porto Marghera (Venice) should not be a surprise. This facility was slated for shutdown several years ago and earned a reprieve as a result of the major fire at the Shell Netherlands ethylene facility. Shell contracted with Versalis to keep the unit running to supply Shell’s needs during the rebuild. This is an old facility in Italy and Versalis has been moving more towards bio-based chemicals and polymers for some time now. The unit is likely in need of some major maintenance to keep it operational and despite the near-term product shortages in Europe the shutdown decision was probably straightforward. On the flip-side, Versalis has delayed a scheduled shutdown of its styrene unit in Mantova because of the strength of the styrene market in Europe. This facility is likely only running in response to the strong market for styrene as there is no ethylene local to the site and with the shutdown of the closest ethylene unit (Porto Marghera) the economics of keeping this styrene facility running in all but the best of markets will be a challenge.
