Much of the North American lubricant industry is laboring under a barrage of disruptions that have batteredbase oil supply in recent months, but the white oils market may be hurting most of all. All three of the major U.S. suppliers are operating under force majeure declarations triggered by feedstock shortages.
One of those suppliers, Sonneborn, has gone so far as to end its purchasing agreement with its supplier of paraffinic oils and has begun to produce them on its own. Another, Penreco, has also been forced to cope with a strike at one of its plants.
Sources say white oil users are feeling the effects of the feedstock disruptions and will continue to do so until normal operations resume.
The United States has three major white oil suppliers: Sonneborn, Penreco and Citgo. Citgo, which markets white oils manufactured at Lyondell-Citgo Refinings plant in Houston,has had its force majeure declaration in place since the fourth quarter of last year, after Hurricane Rita temporarily closed one of its primary feedstock suppliers. The company has not publicly identified the supplier, but Rita closed two Group II base oil plants: the Excel Paralubes joint venture at Westlake, La., andthe Motiva plant at Port Arthur, Texas.
Citgo appeared this month to be recovering, as it relaxed allocations to 75 percent of normal deliveries. A recent announcement about allocations for March suggested a bump in the road, however. An industry source said caps for oils 100 SUS and lower will be loosened to 100 percent, butallocations on heavier grades will be ratcheted to 50 percent.
Sonneborn Inc., of Tarrytown, Pa., declared force majeure Jan. 10, three days after a fire closed one of two production trains at Petro-Canadas base oil plant in Mississauga, Ontario. That train made paraffinic white oils that Sonneborn sold under a supply agreement entered in 1998.
On Jan. 25, Sonneborn distributed a letter informing customers that it had stopped buying white oils from Petro-Canada and planned to permanently resume making them at its own plant in Petrolia, Pa. Since entering the agreement with Petro-Canada, the company has used Petrolia to make naphthenic white oils as well as waxes, petrolatums, and other high purity hydrocarbon specialties. It also made paraffinic white oils there in cases of emergency.
Sonneborn said it is still working to secure enough feedstock to fully supply its business and that its force majeure declaration remains in effect. Management stressed that the Petrolia plant has maintained its registration with the U.S. Food and Drug Administration and stated that the white oils made there will be equivalent to those made by Petro-Canada.
As reported in a late edition of last weeks Lube Report, Penreco declared force majeure and imposed allocations on some grades Feb. 10, after a fire closed Excel Paralubes, one of its primary feedstock sources. On Friday the company instituted caps of 100 percent on several other grades in order to prevent a run on products not covered by the initial allocations.
Penreco is also dealing with a strike at one of its two factories, although the company insisted that it hasnothing to do with its force majeure declaration. United Steel Workers members employed at its Karns City, Pa., plant went on strike Feb. 13. Theunionhad workedunder a contract extension since its previous contract expired Jan. 31, but was unable to resolve unspecified differences with management.
Penreco said salaried employees are operating the plant at normal levels and should be able to continue doing so.
We haveimplementedcontingency plans that will allow us to continue operatingthe Karns City facility, President Thomas C. Readal said. Penreco also makes white oils at its plant in Dickinson, Texas, which isrunning at normal levels.
In addition to the problems at American plants, a Feb. 6 fire at ExxonMobils refinery in Port Jerome, France, has reportedly affected operations at one of the largest white oils producers outside the United States. Market sources said this week that white oils were not among the products that the plant has placed on allocation, but ExxonMobil was limiting spot sales.
Industry sources said white oil users are struggling to cope with the supply constrictions.
We are getting a lot of panicked phone calls, said one marketer, who spoke on condition of anonymity. But the bottom line is, with all of these problems we have right now, there is a definite shortage in the market and no alternative sources to fill it.
Buyers concurred.
There is definitely a shortage at the moment, said Paul Oakley, communications leader for Dow North American Plastics, which uses white oils as an additive in the production of polystyrene. The Midland, Michigan-based chemical giant is the worlds largest producer of polystyrene, a plastic used to make plastic tableware and other disposable food service items, as well as durable products such as television housings.
We are managing the situation in our business, Oakley added. We are not anticipating any disruptions, but there could be some supply constraint on end-users with injection molding operations.
White oil marketers said the disruptions probably present more of a problem for customers in the pharmaceutical and cosmetic industries, which have less flexibility to use alternate materials.
Sources said they expect the market will recover relatively quickly once feedstock producers resume normal operations. Petro-Canada has said it hoped to restart the closed train at the Mississauga plant in early March. Sources say ConocoPhillips, co-owner of Excel Paralubes, has predicted that plant will resume production around March 20.