Saint-Gobain NorPro, a company that makes materials used in oil and natural gas exploration, said it will lay off 120 workers and temporarily suspend manufacturing at its Fort Smith plant until market conditions improve.
The plant makes proppants, in this case a ceramic material used in hydraulic fracking to keep well fractures open to make withdrawal of oil or gas easier. Other types of proppants include sand and a resin-coated sand.
Saint-Gobain NorPro employs 500 in Arkansas, including those laid off in Fort Smith. It has production facilities in Bryant, Fort Smith, Glenwood, Hot Springs, Little Rock and Nashville, and distribution operations in Fort Smith and Hot Springs. Some Fort Smith workers not part of the layoff will work on plant maintenance projects.
According to a release, falling oil prices caused a sudden drop in demand for proppants. A company spokesman said in an email that no further plant closures are expected in Arkansas at this time.
Oil prices dropped nearly 50 percent in 2014. Prices continued to move downward Thursday, with domestic crude falling $1.47 to settle at $46.31 for March delivery as U.S. crude oil supplies stood at the highest January level in 80 years.
"Fort Smith remains a key part of the future of Saint-Gobain's proppants business and we anticipate resuming production as soon as market conditions allow," Jack Larry, general manager of the company's proppant business, said in the release. "At this point we do not know the length of the layoff and have filed a WARN notice with government officials."
The federal Worker Adjustment and Retraining Notification Act requires some employers to provide notice 60 days in advance of plant closings and mass layoffs.
The Arkansas Tech University Business Index for October ranked Fort Smith at the top, making it the leading city in the state for seven of eight months. The city posted a rating of 107.42 for the month, up from 106.55 in September. A rating above 100 indicates a city is faring better than the state average.
Preliminary data on the Fort Smith Metropolitan Statistical Area -- which covers Sebastian, Crawford and Franklin counties in Arkansas and Le Flore and Sequoyah counties in Oklahoma -- for November show unemployment at 5.5 percent, down from 7.1 percent for the same period in 2013. The statewide preliminary unemployment rate for November stood at 5.3 percent, down from 6.9 percent a year earlier.
Samir Nangia, a director with information and consulting firm Colorado-based IHS, said the ceramic proppant market was under pressure before oil's dramatic decline from a marketplace that has become focused on reducing upfront costs. He said ceramic proppants are the most expensive proppant variety, and face competition from cheaper proppant options, like sand, and from overseas makers of ceramic proppants, like China.
Nangia said 90 percent of the U.S. proppant market is less-expensive sand, with sand-covered resin and ceramic proppants each making up about five percent of the market.
He said the low oil prices reduce fracking demand, and therefore lowers the need for all types of proppants across the board.
France-based Compangnie de Saint Gobain owns Saint-Gobain NorPro. Saint-Gobain is a worldwide producer of construction products and materials. Worldwide, the company booked revenue of more than $52.7 billion in 2013. It has more than 187,000 employees in 64 countries.
Business on 01/23/2015