In industrial and manufacturing industries, companies are using various terminologies when it comes to ceasing production.
How to differentiate between idling, closing for maintenance, mothballing, shuttering and dismantling?
Lost your password? Please enter your email address. You will receive a link and will create a new password via email.
Please briefly explain why you feel this question should be reported.
Please briefly explain why you feel this answer should be reported.
Please briefly explain why you feel this user should be reported.
As the name suggests, in this case, the plant is closed for maintenance. The maintenance can be planned maintenance and planned for months or years ahead. Or it can be unexpected, resulted due to a fault or accident. In such circumstances, production is disrupted.
A plant is usually closed is for a short term on a temporary basis. Production is ceased. However, the plant is remained inactive in such a way that the production can be resumed on short notice.
Idling is different from maintenance closures/shutdowns. Idling usually happens when the market is not doing well, such as prices are down, less demand, cost of production remained high etc.
Mothballing is a long term closure of a plant. The process is also maintained in such a way that if required, the plant can be brought back into service. However, the longer the plant is mothballed, the longer it would take to get active. Weak market fundamentals are the prime factors behind mothballing as well. When a plant becomes idle for a very long time, it is can then also entered into mothballing.
To get the plant active will also then require renovations and substantial investments. In some industries such as steel, the furnace remains active in idling, but it goes offline in mothballing. The cost of restarting of furnace is then higher for a mothballed furnace than an idled furnace.
Shuttering of a plant means that the plant is permanently closed. In such circumstances, the only way is to bring the plant online is either to sell the plant to a new owner who is then willing to get the plant restarted, or plant owner gets some financial supports or debt restructuring etc.
Shuttering of a plant usually happened in case of bankruptcy, huge losses, or when the plant required significant investment to make it efficient. Sometimes the machinery is outdated, which makes the plant uncompetitive. The new owner needs to conduct full due diligence of the plant before the purchase to make sure that enough capital is available for resuming the production.
In most cases dismantling means the formal demolishing of the plant and selling and machinery and equipment to other companies or selling as scrap. Dismantling usually happens when the plant reached its end of life and required enormous investment to make it workable, or in case of bankruptcy when there is no potential buyer. The plant is then dismantled and sold the machinery and land to pay off the debt.
In some case companies also dismantle the plant to relocate the plant to another place due to various reasons such as M&A, regulations etc. In China, some factories/plants are ordered to be dismantled due to pollution, though they are then relocated to places where environmental laws are lax.