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BUCHAREST (Romania), August 9 (SeeNews) - Polish chemicals producer Ciech said on Friday that it is preparing to halt production at its Romanian soda factory from September 18, as the factory lacks a cost-effective source of steam at present.
"The direct reason for this decision is the termination of the existing contract for the supply of technological steam with CET Govora, Ciech’s only available steam supplier in Romania," the company said in a press release.
CET Govora has proposed a new price of industrial steam 135% higher than it was in 2018, which weakens the profitability of Ciech Soda Romania’s business operations, Ciech explained.
Advanced analyses of available scenarios are underway, including the possibility of acquiring a new, cost-effective source of steam in cooperation with external partners, and further decisions in this regard will be made towards the end of the year, Ciech added.
On June 19, Ciech said that its Romanian unit received a three-month notice of termination of its deal with CET Govora for the supply of industrial steam due to the inability of CET to deliver steam on the terms specified. In April, Ciech Soda Romania signed a 330.6 million zloty ($86.7 million/77.5 million euro) agreement with CET Govora for industrial steam deliveries for 21 months until the end of 2020.
The decision on the preparations for the halt of production of the Romanian factory until a reasonable, cost-effective source of steam is acquired, leaves many open possibilities, Ciech said on Friday, adding that technological steam - a raw material necessary for the production of soda - made over 30% of Ciech Soda Romania's operating costs last year.
"Ciech Soda Romania is still open to further negotiations with CET, however, it cannot accept yet another increase in the price of this raw material as it would mean a permanent loss of production profitability. The company is intensively reviewing the available options of solving the situation, including, among others, the ability to obtain steam from another cost-effective source," the Polish company said.
In preparation for a long-term pause in production, Ciech said it is developing a broad severance package offer for its employees in Romania, including a voluntary leave program, outplacement programme and proposals to move to other factories within the Ciech Group. Further decisions in regard to the future of Ciech Soda Romania will be made towards the end of the year.
Over the past dozen or so years, Ciech has been saving the Romanian plant from bankruptcy and made copious efforts to develop it, the company said. Between 2006-2018, the Ciech Group invested over 100 million euro ($112 million) in Romania, thanks to which the production process was thoroughly modernized, and it extended the production capacity. As a result of the implemented investments, Ciech Soda Romania products are shipped to Europe, Asia, or Africa among others.
The Romanian plant is one of four soda factories in the Ciech Group, with the other three located in Poland and Germany. Apart from Romania, all plants have their own sources of technological steam. Ciech Soda Romania is the smallest soda company in the group.
CET Govora, located in Ramnicu Valcea, in southern Romania, has 4 generation units of 50 MW each. It is insolvent since May 2016.
Ciech Soda Romania, formerly known as Uzinele Sodice Govora, is located in the southern county of Valcea, in Govora. The soda factory was the first foreign subsidiary acquired by Ciech in December 2006. Ciech Soda Romania produces soda ash, water glass, sodium silicate and soda derivatives.
($= 0.8923 euro)