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US Olin, Shintech fight over motion to provide VCM to PVC plant – ICIS

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Al Greenwood
28-Jul-2023
HOUSTON (ICIS)–Olin pushed back in court this week against a demand that it and its subsidiary deliver vinyl chloride monomer (VCM) to Shintech’s polyvinyl chloride (PVC) plant in Freeport, Texas.
Shintech relies on the Olin subsidiary to supply its Freeport plant via pipeline with about 50% of its feedstock. The nearby VCM plant that provides the feedstock is undergoing an extended turnaround that started in March. Shintech continues to run the PVC plants at reduced rates because it cannot find another source of VCM.
Shintech alleged on 14 July that the length of the turnaround exceeded the limit specified in its supply contract between it and the Olin subsidiary, Blue Cube Operations. Shintech filed a motion in court on 14 July that would force Olin and Blue Cube to supply it with VCM.
On Monday, Olin alleged that the companies’ supply contract imposes the turnaround deadline on the subsidiary, Blue Cube Operations. It makes no mention of Olin.
Olin declined to comment further because the litigation is pending. Shintech did not respond to a request for comment that was made through its lawyer.
LAWSUIT OVER SUPPLY CONTRACT
The dispute over the turnaround is part of a lawsuit over the VCM supply contract between Blue Cube and Shintech.
In the lawsuit, Shintech accused Olin of threatening to cut off its VCM supplies following a planned turnaround if it did not resolve a dispute over $18m.
Olin has maintained that it is within Blue Cube’s rights to withhold VCM shipments over the disputed $18m.
Shintech refused to make payment, alleging that the disagreement over the $18m is a good faith pricing dispute. Such disputes cannot be used to justify the suspension of VCM shipments.
Shintech sued Olin and Blue Cube on 14 April, days before the suspension of VCM deliveries would take effect. Shintech wanted the court to impose a preliminary injunction on Olin and Blue Cube, which would force the companies to maintain VCM supplies while the companies attempt to resolve their dispute.
Without the order, Shintech alleged it would suffer irreparable harm because it cannot find another source of VCM. The Freeport plant has no port access, while the US has limited rail connections and a shortage of railcars that can carry VCM.
The Freeport plant gets the rest of its VCM from Shintech’s operations in Louisiana and those plants are running at full capacity. They cannot produce more VCM to supply the Freeport plant.
On 18 May, the court denied Shintech’s initial request. It said the company could avoid disruptions to its operations by paying the $18m. If Shintech’s complaints are valid, it can recover the payment and any damages in court.
Shintech agreed to pay the $18m if VCM shipments were resumed.
Shintech wired the money on 24 May. The next day, Olin told Shintech that the plant could not supply the VCM because of a major problem.
Partial deliveries of VCM were resumed on 17 June. Shipments ended on 12 July because of more plant problems.
Shintech amended its lawsuit on 14 July and made another request to compel Olin and Blue Cube to provide it with VCM.
It alleged that Blue Cube has defaulted on the supply contract and that obligates Olin to supply the VCM on behalf of Blue Cube. Moreover, it failed to provide the VCM after receiving the $18m payment.
OLIN’S RESPONSE
On Monday, Olin and Blue Cube requested that the court dismiss Shintech’s lawsuit and reject its request for the preliminary injunction.
Olin alleges that it has not breached the contract because it is between Blue Cube and Shintech. Olin only guarantees the performance of the contract in the event of a default by Blue Cube.
Blue Cube is not in default of its contract, Olin alleged. Shintech owed it money, and Blue Cube was within its rights to withhold shipments.
Even if Blue Cube had defaulted on the contract, Shintech was supposed to notify it and Olin about the default. Shintech failed to properly do this.
Shintech filed its lawsuit in the US District Court, Southern District of Texas. The case number is 3:23-cv-112.
OTHER LAWSUITS AGAINST OLIN
Three other companies have sued Olin in federal court over their supply contracts.
On 21 March 2022, Innovative Water Care (IWC), a subsidiary of Solenis, sued Olin over its contract to supply chlorine and caustic soda by pipeline. Olin filed a counterclaim.
In August 2022, the two sides agreed to dismiss their claims.
The lawsuits were filed in the US District Court, Eastern Tennessee District. The case number is 1:22-cv-00070.
On 3 May 2023, Albemarle sued Olin over a contract to supply its plant in Magnolia, Arkansas, with chlorine by rail.
Albemarle filed its lawsuit in the US District Court, Eastern District of Virginia. The case number is 1:23-cv-600.
On 28 April 2023, Odyssey Manufacturing sued Olin over a contract to supply it with sodium hypochlorite. The case was filed in the US District Court, Middle District of Florida. The case number is 8:23-cv-00940
The Odyssey and Albemarle lawsuits are pending.
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