Celanese Corporation Declares Force Majeure on Western Hemisphere Acetic Acid and VAM

Rhea-AI Summary

Celanese (NYSE: CE) has declared force majeure and sales control for acetic acid and vinyl acetate monomer (VAM) in the Western Hemisphere. This decision follows disruptions in raw material supplies important to production, particularly affecting its U.S. gulf coast network.

Production is anticipated to drop by 15-20% in Q2 due to these challenges. The company is leveraging its integrated supply chain to minimize customer impact but expects higher costs and potential volume losses.

Details on the resolution and financial impact will be provided in the Q2 earnings report.

Positive

• Celanese's integrated supply chain allows for flexibility, reducing customer disruption risks.
• Investments in supply chain capabilities are paying off by helping manage current challenges.
• The company prioritizes continuity of supply to maintain customer relationships.

Negative

• Anticipated production drop of 15-20% for acetic acid and VAM in Q2.
• Higher costs due to production at more expensive facilities, external sourcing, and logistics.
• Potential volume impact depending on the scale of production losses.
• Uncertainty regarding the duration and full financial impact of the disruption.

Insights

Financial Analyst

The declaration of force majeure by Celanese Corporation due to supply disruptions in the Western Hemisphere has notable financial implications. Force majeure refers to unforeseeable circumstances that prevent companies from fulfilling contracts. This declaration, alongside sales controls, indicates a serious disruption in their supply chain. According to Mark Murray, Celanese expects a 15-20% negative impact on their second quarter production of acetic acid and vinyl acetate monomer (VAM). This reduction will likely increase incremental costs due to production shifts to higher-cost facilities and external sourcing. Consequently, the company's margins may be squeezed, leading to potential volume impacts.

Retail investors should consider how these disruptions might affect Celanese's $10.9 billion net sales forecast for 2023. Lower production capacity could hinder revenue in the short term, while increased operational costs may impact profitability. It will be essential to keep an eye on the company's earnings report next quarter for further clarity. Investors should also observe how well Celanese can utilize its integrated supply chain flexibility to mitigate these disruptions.

Market Research Analyst

This force majeure impacts more than just Celanese; it affects the broader market for acetic acid and VAM, which are key inputs across various industries, including automotive, textiles and adhesives. Any significant reduction in supply from a major player like Celanese could lead to a shortage in the market, driving up prices for these chemicals. This increased cost could ripple through multiple sectors, potentially impacting the pricing of end products.

Retail investors should note that Celanese's ability to maintain customer relationships through this period will be crucial. Companies that can successfully manage customer expectations and supply continuity during disruptions often emerge more robust in the long run. The company's commitment to sustainability and strategic investments in supply chain flexibility should also be seen as long-term positives, even though the immediate outlook appears challenging.

DALLAS--(BUSINESS WIRE)-- Celanese Corporation (NYSE: CE), a global chemical and specialty materials company, today confirmed a declaration of force majeure and sales control for acetic acid and vinyl acetate monomer (VAM) sold in the Western Hemisphere. This comes as a result of intensifying force majeure conditions and operational failures experienced by multiple suppliers of critical raw materials essential to Celanese’s production of these products. Production challenges caused by these raw material supply disruptions, as well as other operational issues in its Acetyl Chain U.S. gulf coast network, are being assessed and actions are being taken to offset production losses.

The Acetyl Chain business is focused on meeting customers’ needs by utilizing all available network capabilities. The business has invested over the years to strategically enhance the flexibility of its integrated supply chain and will exercise that optionality to minimize customer disruptions. While under sales control, all non-contracted orders will be reviewed on a case-by-case basis.

“Right now, we anticipate that our second quarter U.S. gulf coast production of acetic acid and VAM will be negatively impacted by 15 to 20 percent as a result of these temporary challenges which we are still navigating,” said Mark Murray, senior vice president of the Acetyl Chain. “As we work through these challenges, we are prioritizing continuity of supply for our customers by employing the optionality that has been the hallmark of this business. The primary financial impact of these challenges in the second quarter will be due to incremental costs associated with production at higher cost facilities, external sourcing, and logistics in order to minimize impacts to our customers. There may also be a volume impact in the quarter depending on the magnitude of lost production.”

Celanese regrets the impact this could have on customers and will stay in close communication to minimize the impact of these challenges. At this time, Celanese cannot provide any further details or timing of the full impact to customers or to its financial outlook. Celanese will comment further on the resolution of these temporary challenges and the financial impact when it reports second quarter earnings.

About Celanese

Celanese is a global leader in chemistry, producing specialty material solutions used across most major industries and consumer applications. Our businesses use our chemistry, technology and commercial expertise to create value for our customers, employees and shareholders. We are committed to sustainability by responsibly managing the materials we create for their entire lifecycle and are growing our portfolio of sustainable products to meet increasing customer and societal demand. We strive to make a positive impact in our communities and to foster inclusivity across our teams. Celanese is a Fortune 500 company that employs approximately 12,400 employees worldwide with 2023 net sales of $10.9 billion.

Forward-Looking Statements

The information set forth in this release contains certain “forward-looking statements,” which include information concerning the Company’s plans, objectives, goals, future revenues, financial performance, expected future costs and other information that is not historical information. All forward-looking statements are based upon current expectations and beliefs and various assumptions. There can be no assurance that the Company will realize these expectations or that these beliefs will prove correct. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained herein. Numerous factors, many of which are beyond the Company’s control could cause actual results to differ materially from those expressed as forward-looking statements. Certain of these risk factors are discussed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and other filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date it is made, and the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date the statement is made.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240607412772/en/

Investor Relations

Bill Cunningham

+1 972 443 4730

william.cunningham@celanese.com



Media Relations – Global

Brian Bianco

+1 972 443 4400

media@celanese.com

Source: Celanese Corporation

FAQ

What is the impact of the force majeure declared by Celanese?

Celanese expects a 15-20% drop in Q2 production of acetic acid and VAM due to supply disruptions.

Why did Celanese declare force majeure on acetic acid and VAM?

Celanese faced critical raw material supply disruptions and operational failures, leading to this decision.

How is Celanese mitigating the impact of the production challenges?

Celanese is utilizing its flexible supply chain and investing in higher-cost facilities and external sourcing.

What financial impacts does Celanese anticipate from the force majeure?

Celanese expects higher costs and potential volume losses, with details to be disclosed in the Q2 earnings report.

What regions are affected by Celanese's force majeure declaration?

The force majeure affects acetic acid and VAM production in the Western Hemisphere.