The drop in energy prices and the subsequent drop in demand for energy-industry products has resulted in Saint-Gobain closing its Fort Smith proppants plant and cutting around 120 jobs. The cuts were effective Wednesday (Jan. 21).
Wednesday’s (Jan. 21) press release said the company would “temporarily suspend production” at the Fort Smith plant located near the Gerber plant. The company is not closing a newer proppants plant in central Arkansas that was opened in 2012. Prior to Wednesday, the company employed 500 in Arkansas.
Proppants are used in the extraction of oil and natural gas. The proppants are injected into geologic structures to prop them open so oil or gas is able to flow up and out of the well.
The Saint-Gobain plant is the second proppant plant closure announcement in the area in the past 60 days. Officials with Houston-based Oxane Materials announced Nov. 25 they would close their Van Buren proppant plant on Jan. 23, 2015. The closure was estimated to result in the loss of 70 jobs.
Jack Larry, general manager of Saint-Gobain’s proppants division, said the plant could reopen if energy prices recover. The company will keep a small contingent of workers at the plant for monitoring and maintenance.
“This difficult action has been brought on by a global drop in oil prices and a sudden drop in demand for proppants,” Larry said in a statement. “Fort Smith remains a key part of the future of Saint-Gobain’s proppants business and we anticipate resuming production as soon market conditions allow. At this point we do not know the length of the layoff and have filed a WARN notice with government officials. We will continue to communicate with the affected employees and appropriate government agencies as the situation evolves.”
Earlier this week on the New York Mercantile Exchange, natural gas futures fell more than 7% to $2.831 per MMBtu’s as this year’s mild winter continues to deflate prices.
Between 2010 and 2014, oil prices were stable with futures prices typically trading above $100 per barrel. However, the price began a precipitous decline in June, with oil now trading between $45 and $50 per barrel. WTI crude closed Wednesday at $46.39. Bob Dudley, CEO of oil giant BP, told BBC News on Wednesday that low oil prices could be the norm for up to three years. However, the secretary general of the Organization of Petroleum Exporting Countries (OPEC) said Wednesday that oil prices could begin to rebound as soon as 30 days.
The Fort Smith plant opened in 1979 by Norton Proppants, with the plant expanded in 1984 to triple production. In 1989, Norton was acquired by Saint-Gobain, a company based in Paris. Saint-Gobain invested $15 million in plant upgrades in 2010-2011.
Saint-Gobain opened in late 2012 a $100 million proppant plant in Saline County in central Arkansas. The 100,000-square-foot plant was estimated to employ 140 at full production. That plant is not being idled.
The move by Saint-Gobain is another hit for the region’s struggling manufacturing sector. The area manufacturing sector employed an estimated 17,800 in November, below the 18,400 in November 2013. Sector employment is down more than 37% from a decade ago when November 2004 manufacturing employment in the metro area stood at 28,600. Annual average monthly employment in manufacturing has fallen from 28,900 in 2005, 19,200 in 2012, and to 18,300 in 2013.
Saint-Gobain had recent global annual sales of $52.7 billion, and has 187,000 employees in 64 countries.