What is Force Majeure
Force Majeur is a French word that means Major Force.
Force majeure is a common clause in contracts which frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic, sudden legal changes or an event described by the legal term act of God, prevents one or both parties from fulfilling their obligations under the contract. (Read more)
Some petrochemical companies are accused of calling upon Force Majeure to not having to supply plastic at a low price in France.
Although the speaker Jean Martin (representing Polyvia, Federation of Plastic Converters) doesn’t mention Total, the rest of the article refers to Total.
The current price of oil is low and so should be the plastic prices. Low plastic prices represent a loss of revenue for petrochemicals and plastics companies.
Some petrochemical companies may be tempted to call upon “Force Majeure” to avoid supplying plastic at a low price and losing revenues. It gives them a legal right to escape from their contractual oblications.
However, they create market shortages that will cascade down to the smaller players such as the plastic converters.
Some people believe “Force Majeure” is not claimed honestly but for financial reasons. It’s claimed to legally escape their contracts to reduce the supply and create high prices artificially.
It’s an abuse of power and legal clauses.
According to the BFM TV presenter: similar problems have occurred in 2010 and 2015. These petrochemical companies have been using “Force Majeure” when oil prices are low.
Watch the video
My Personal Opinion
I believe in liberalism and freedom of entrepreneurship. This includes the freedom to set your prices freely: it should be your right to set the prices that you want for your goods and services. Your client can go elsewhere if he doesn’t agree! However, when you have a contract you should fulfil it.
The current Covid crisis may be a valid ground to call upon “Force Majeure”.
However, there may be reasons to believe that some companies are not claiming “Force Majeure” on honest grounds but to keep the prices artificially high.
My intuition tells me that these small plastic converters may have a case and that market manipulation may be involved.
It becomes a cartel when petrochemical companies agree upon this and act collectively.
What are the French authorities going to do about it?
France is still, to some extend, an Ancient Regime where the “have lots” have more rights than the “have nots”.
Rest of the article
Some processors have to suspend part of their production.
Are Covid tests threatened by a plastic shortage? This material is essential for the medical sector, but the plastics industry is sorely lacking in raw materials. Plastics processing companies are even on the verge of paralysis.
In fact, the sector has sounded the alarm bells since last month with delivery delays: up to 3 months for certain types of plastics. SMEs have even had to shut down production lines.
Plastic suppliers like Total or Ineos, on the other hand, invoke cases of “force majeure” to authorize themselves to suspend production and therefore delivery of raw materials. Beginning of explanation: demand in Asia has risen sharply in recent months while the price of oil has started to rise again since autumn 2020. Producers also report technical difficulties while some machines have been shut down. last year.”The fact that this is a major force totally relieves them of their commitment” blows Jean Martin, CEO of Polyvia, professional union in the plastics and composites sector, invited to BFM Business on Monday. “On the other hand, downstream companies (…) find themselves in great difficulty in relation to their customers.”
The situation is not new. In 2010 and then in 2015, shortages had already affected the sector. The “force majeure” argument has also been a subject of controversy within the industry for several years since they allow suppliers to exceed the conditions of commercial contracts.
For the moment, the time is not yet for paralysis. But the alarm bells have been sounded to avoid severe shortages, especially of PCR tests. “A certain number of companies in our branch have made investments (…) and are waiting to be able to produce them” warns Jean Martin.