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Chemical plant explosion thrusts Arkema into spotlight

  • Records show that the plant, located about 25 miles (40 kilometers) northeast of Houston, was fined nearly $110,000 in February
  • Arkema warned investors in its most recent annual securities filings published last year that its facilities were at risk from "accidents, fires, explosions and pollution"
A fire burns at the flooded plant of French chemical maker Arkema SA in Crosby, Texas, August 31, 2017.
Adrees Latif | Reuters
A fire burns at the flooded plant of French chemical maker Arkema SA in Crosby, Texas, August 31, 2017.

Arkema SA is not exactly a household name, but its products are found in everything from plastics in automotive parts to adhesives for baby diapers. The company also claims to be the third-largest producer of hydrogen peroxide in the world.

But now it has a new distinction after Arkema reported two explosions and black smoke coming from its plant in Crosby, Texas early Thursday morning, raising serious health and safety concerns.

Records show that the plant, located about 25 miles (40 kilometers) northeast of Houston, was fined nearly $110,000 in February by the Occupational Safety and Health Administration over 10 safety violations found during an inspection.

Investigators classified the violations as "serious," meaning there were workplace hazards that could cause an accident or illness that would "most likely result in death or serious physical harm."

The gravity of six of the violations were rated a 10. But the electronic records don't further explain the circumstances of the violations, what investigators uncovered and any improvements Arkema pledged to make. OSHA later reduced its fines to just over $90,000.

Arkema warned investors in its most recent annual securities filings published last year that its facilities were at risk from "accidents, fires, explosions and pollution" due to the nature of the hazardous and flammable materials it uses. It said accidents may leads to compensation claims, lawsuits and expensive delays in production.

Based in Colombes, France, Arkema has 133 facilities spread throughout 50 countries and employs 19,637 people worldwide. Arkema's U.S. arm is headquartered in King of Prussia, Pa., with 26 locations throughout the country. It has four other facilities in Texas besides Crosby: in Bayport, Beaumont, Clear Lake and Houston.

"This is a significant player," said Mark Eramo, a vice president at financial services company IHS Markit. "A responsible operator that has unfortunately faced an unprecedented situation."

Second fire on Friday

Arkema makes adhesives that are used in everything from diapers to tiles and wallpaper, as well as chemicals for plastics in auto parts, clothing and eyeglasses. Its Crosby plant produces liquid organic peroxides found in countertops and acrylic-based paints and coatings in auto parts.

Thursday's explosions was set in motion after Hurricane Harvey's floodwaters knocked out power and backup generators, disabling the refrigeration needed to keep the organic peroxides stable. One police officer helping to secure the site was reportedly taken to a nearby hospital after inhaling fumes, while nine others admitted themselves as a precaution.

Residents living within a 1.5 mile (2.4 kilometer) radius of the French chemical group's site had been evacuated as the company warned there was a risk of explosions and fire. "Organic peroxides are extremely flammable and, as agreed with public officials, the best course of action is to let the fire burn itself out," the company said Thursday.

On Friday afternoon, a second fire was triggered at the Crosby plant with local television stations showing flames and thick black smoke escaping from the site. Business and relief officials said the new fire occurred at around 5 p.m. local time, according to Reuters.

Shares of Arkema were more than 2.5 percent lower in Paris during early afternoon deals on Thursday. The stock was off by around 1.5 percent immediately after reports of the Crosby blast emerged Thursday, before slipping to a three-month low shortly after midday.

By the session close on Friday afternoon, shares had recovered most of their losses, trading at 92.49 euros a share. Year-to-date the stock is down 0.48 percent.

Initially spun off from Total

Arkema was initially spun off from Total in 2004. It separated to become a publicly traded company in 2006. Thierry Le Henaff has been CEO since it was founded.

The company's revenue has held steady over the last few years, reaching $7.54 billion euros ($8.9 billion) in 2016. For comparison, its peer DuPont recorded $24.6 billion in revenue and Dow Chemical recorded $48.16 billion in the same year.

Arkema claims to be the third-largest producer of hydrogen peroxide in the world, which can be used for pharmaceuticals, bleaching textiles and treating wastewater.

The company lists 57 employees at its Crosby plant. A link on its website, last updated in 2015, says that Arkema dedicated $700,000 in approved capital investments for health, safety and environmental projects at the Crosby location. And under its safety record, it lists "One lost time injury in the last 7 years."