On July 29, an explosion and subsequent fire occurred at a plant in the southern section of the chemical complex, which produces aroma ingredients and key precursors for vitamins.
The fire caused significant damage, forcing the plant's shutdown and leading BASF to declare force majeure on the supply of certain products, including vitamin A, vitamin E, and carotenoids, as well as several aroma ingredients.
In an update yesterday, BASF provided further details based on inspection results, repair progress, and confirmed delivery dates for replacement equipment. The company confirmed that production of aroma ingredients such as Pyranol, Methylionone 70, and DL-Menthol FG is expected to restart in the last week of October. Revised allocation volumes for these products will be communicated in the second half of November 2024. The remaining aroma ingredients will be brought back online gradually between April and June 2025.
As for nutrition ingredients, production of vitamin A is expected to resume in April 2025, with vitamin E and carotenoids following in July 2025. However, BASF noted that several months would be required after the restart to fully restore inventory levels and return to "business as usual."
In late August, BASF had provided a tentative timeline, estimating that production of vitamin A, vitamin E, and carotenoid products would not resume before January 2025.
The company reiterated yesterday that the latest timelines are based on current information and may be subject to further changes.
In September we heard about the broader risks of such supply chain disruptions and on how industry should develop contigency plans to ensure nutrition security.
Price impact
Stefan Schmidinger, chief economist for markets and strategy at Kemiex, told us that price risks for vitamins E and A are expected to remain elevated for an extended period.
"Parts of the market were caught off guard, having anticipated a price normalization and production restart closer to the initially projected dates, rather than the current three to six month delay."
In the meantime, major manufacturers have ceased offering products as they reassess the situation, fueled by unconfirmed rumors that Chinese policymakers are allegedly restricting production volumes for the coming months, he said.
"While no severe shortages are expected over the next nine months, the balance of negotiating power has shifted in favor of sellers. For vitamin A, however, new entrants are set to broaden supply in the coming months. Share prices of Chinese producers have surged since yesterday. For dsm-firmenich, it is estimated that every €1/kg increase in vitamin E prices translates to an annualized €50m impact on EBITDA."
