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Sector Wrap: Ethylene-related shares mixed

The Associated Press

A fire at an ethylene plant in Louisiana could force a significant short-term shift in the U.S. ethylene market, a group of Citi analysts said.

Officials say an explosion at The Williams Companies Inc.'s chemical plant in Geismar, La., about 20 miles southeast of Baton Rouge, started a fire Thursday morning. The plant makes highly flammable gases that are basic building blocks in the petrochemical industry. At least one person was killed and 73 people were injured in the event.

Citi analysts led by P.J. Juvekar said that the event could cause a major shift in the ethylene market, particularly given that a number of other petrochemical plants in the U.S. are currently offline. About 8.5 percent of the country's production ethylene production capacity is currently down, and they estimate the Williams incident brings that to roughly 10.5 percent.

In a note to clients, the analysts said competitors such as LyondellBasell Industries NV may benefit from fewer players on the market. Its stock gained $2.47, or 3.9 percent, to close at $66.59 Thursday.

Companies that buy ethylene, such as The Dow Chemical Co. and Axiall Corp. could suffer, according to the analysts. Shares of Dow rose 86 cents, or 2.6 percent, to end Thursday at $34.65. Axiall gained $1.86, or 4.4 percent, to close at $43.89, amid a broader market uptick.

The analysts also said that the incident could speed up the turnaround and expansion that Williams had planned for August. They said the worst case scenario is that the plant shuts down and does not come back online until it's already scheduled reopening date after the expansion is complete.

Williams Companies shares fell 33 cents to $33.70. The stock traded as low as $32.54, a 4.4 percent drop, earlier in the session.

The company is also a controlling partner in Williams Partners L.P., which owns most of the Williams Companies' pipelines. Shares of Williams Partners fell $1.24, or 2.5 percent, to $48.43

Citi said that the impact of similar tragic events in the chemical industry in the past has typically been short-term disruption rather than long-term.