AdvanSix, Parsippany, N.J., said on June 24 the company is assessing the potential business impact of the fire that occurred Friday morning, June 21, at the Philadelphia Energy Solutions’ (PES) refinery in Philadelphia. PES is one of multiple suppliers to AdvanSix of cumene, a feedstock material used to produce phenol, acetone, and other chemical intermediates. The company continues to operate its facilities while implementing its mitigation plans, including evaluation of business interruption insurance.
“We are thankful for the safety of all PES employees and have offered our assistance in the local area following Friday’s significant fire,” said Erin Kane, AdvanSix President and CEO. “As a result of this event, we expect an increase in our feedstock and logistics costs to persist into the third quarter 2019. We are actively working with a number of suppliers to mitigate the impact on our business operations.”
AdvanSix anticipates an approximately $7-$12 million unfavorable impact to pre-tax income in third-quarter 2019, including incremental raw material and logistics costs, as well as a modest unfavorable impact from fixed cost absorption. The company said it remains on force majeure with phenol customers and does not expect a material impact to second-quarter 2019 financial results from the PES fire.
In the meantime, the news only got worse for PES. The company announced on June 26 that it was laying off 1,024 of its some 1,200 workers, and planning to shut down. While the June 21 fire and explosion occurredat its Girard Point section of the refinery, there was another fire just two weeks prior at its other section, Point Breeze.
“It probably pushed them over the edge, and they were having financial troubles already,” Philadelphia Mayor Jim Keeney, referring to the June 21 explosion, told Bloomberg in an interview. Keeney said it was too early to speculate about PES’s chances of finding a buyer and if there would be public support to subsidize a new owner, as happened in 2012. Even with that support, PES eventually went into Chapter 11 and came out of it last August.
Unlike Mayor Keeney, analysts did speculate, saying it may be hard for the troubled refiner to find a buyer. They noted that Northeast refiners are not on the receiving end of crude oil pipeline from Texas or North Dakota, that instead they have to rely on railed tons or U.S. flagged tankers or imports. On top of that, Midwestern refiners, who have access to lower-cost crude, have been encroaching on PES markets.