Nouryon cuts production in China as coronavirus dampens demand

12:47 PM | February 20, 2020 | Ian Young

All Nouryon's (Amsterdam, Netherlands) production plants in China except one are back in operation following the extended Lunar New Year holiday, but the facilities are running well below capacity because of the impact of the coronavirus outbreak, says Nouryon CEO Charlie Shaver. Speaking to CW on Wednesday, Shaver said the company's biggest plants in the country, including its Ningbo facility, are operating at 30–50% of capacity. This is in response to a fall demand in China for the company's products, which is currently at 30–50% of normal levels, he says.

Nouryon's China operations generate about €700 million ($756 million) of the company's approximately €5 billion/year in sales. "Most of the products we make in China are sold in China," Shaver says.

Shaver expects the "demand constraints" to continue through March and April. "We may see some rolling effect for a few months," he says. "Supply chains are limiting our operations because we have customers in China whose plants are still down [after the holiday]." Nouryon customers that export from other countries to China are also impacted, Shaver says. Demand for the company's bleaching chemicals has weakened because pulp demand is falling with lower production in China of consumer products such as white goods.

Nouryon, meanwhile, is receiving offers of raw-material products elsewhere in the world from companies that would normally ship those items to China. "There's some downward pressure on pricing of raw materials across the board," Shaver says. "We have noticed in the last week or two that people are offering us products for sale. Some suppliers are offering us lower prices." He sees this as a "temporary dislocation," however. Shaver expects a "hit" from the coronavirus to the company's first-quarter results, but "no material impact" to its full-year earnings.

Nouryon's organic peroxides plant at Tianjin is the faciity that has not restarted. The company is relocating its Tianjin organic peroxides production to a new plant in an industrial park in a €90-million project. These plans have been delayed by several months because of the late return of construction workers to the site due to government restrictions, Shaver says. The new plant had originally been due to start up in the second quarter of 2020  with a capacity expansion of 30–70%. The company has not adjusted its overall capital expenditure plans, however, he says.

Nouryon makes organic peroxides at Ningbo as well as Tianjin. The company's other Chinese production sites are at Boxing; Guangzhou; Jiaxing; Songjiang, near Shanghai; Suzhou; and Taixing.