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VCM Leak in Storage Area Thought Cause of Deadly Explosion in Mexico

HOUSTON, April 21, 2016 (PCW) -- Three explosions ripped through the Clorados III VCM plant of Petroquimica Mexicana de Vinilo, or PMV, on Wednesday at Coatzacoalcos, Veracruz. The strong initial explosion was followed by two secondary explosions. Twenty-four workers are confirmed dead so far, with over 100 injured. Nineteen workers remain hospitalized, with 13 in serious condition. Eight workers are still missing.

PMV is a joint venture of Mexichem S.A.B. de C.V (Mexichem) and state oil company Petróleos Mexicanos (Pemex). The VCM plant is managed by Mexichem, but the workers are Pemex employees.

The blast was reportedly caused by a leak, which was thought to be in the VCM storage area. The entire VCM storage area was destroyed. The residual VCM in the system was burned off in a controlled fire that ended Thursday.

Six Months to a Year for Repairs

Mexichem has not yet determined how long it will take to repair and rebuild the serious damage the plant incurred. Preliminary unofficial estimates are that it will take anywhere from six months to a year before the plant restarts. Industry participants were guessing it will take at least a year before the plant comes back online.

The Clorados III VCM plant has a nameplate capacity of 400,000 mt/yr. According to Mexichem, it produced 177,000 mt of VCM in 2015. The company had hoped to lift production to 330,000 mt/yr by the end of 2016.

Mexichem had previously invested $200 million in the plant to update it in an effort to boost its operating rate above the 50% maximum at which it had produced for years. The investment had so far not resulted in noticeably higher operating rates. Sources in Mexico said today that Mexichem was planning to invest a further $100 million in the plant this year.

In addition to the VCM it receives from this plant, Mexichem also buys VCM from the US through a contract with OxyVinyls, and on a spot basis from Axiall, to feed its PVC production in Mexico.

Fewer Exports

Sources in Mexico estimated that Mexichem will have enough VCM to supply PVC to the Mexican and Colombian markets, but said the company will probably have to back off on exports.

Mexichem’s April domestic PVC resin prices were still at $780-810/mt for pipe grade (35.38-36.74 cpp) and $820-840/mt for GP grade (37.19-38.10 cpp) this week, delivered and with 60- to 90-day payment terms.

Thursday afternoon, Mexichem told customers that its May domestic prices will be rising by $100/mt to $880-910/mt for pipe grade (40.32-41.28 cpp) and to $920-940/mt for GP grade (41.73-42.64 cpp).

Mexichem had previously said that its May export price would rise to $800-820/mt FOB Altamira (36.29-37.19 cpp FOB). However, it has now stopped all export negotiations. Resin for Apr lifting had sold out quickly at $700-720/mt FOB Altamira (31.75-32.69 cpp FOB). -- Donna Todd

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