Plastic resin markets could be affected by an April 29 fire that shut down a feedstocks plant operated by Huntsman Corp. in Port Arthur, Texas.
One firefighter was treated for heat exhaustion and released from a local hospital. All 50 employees at the site were evacuated safely.
Officials with Salt Lake City-based Huntsman said the fire started around 7:30 a.m. after a small explosion in the site's propylene refrigeration unit. The cause of the fire remains unknown.
Damage to the plant was described as ``significant,'' and company officials said it could be out of commission for several months. The fire was not completely extinguished until 1 p.m. on May 3, Huntsman spokesman Don Olsen said by telephone. Huntsman officials still had been unable to inspect damage at the site as of May 3, and Olsen said he did not know when an inspection might take place.
But, he added that Huntsman already is planning to rebuild at the Port Arthur site. The firm has declared force majeure, as a result of the fire, on ethylene and propylene produced there.
The incident has prompted Nova Chemicals Corp. to idle a nearby styrene monomer plant in Bayport, Texas, since the Huntsman operation was a primary ethylene supplier to that site. Nova officials were unsure about when they will restart styrene production in Bayport - which accounts for about two-thirds of the firm's styrene capacity - but they added that the firm's other plants can meet customer demand.
Huntsman's Port Arthur plant produces 1.4 billion pounds of ethylene annually, representing about 2 percent of total North American capacity for the material, which is a key plastics feedstock. The plant also has annual capacities of 800 million pounds of propylene, 680 million pounds of cyclohexane and 460 million pounds of benzene. The plant does not produce resin.
Huntsman officials added that the fire ``will not significantly impact'' the firm's plans to split later this year into two separate, publicly traded companies - one focused on commodity products, the other on specialties.
Plastic resin markets that could be affected by the incident include polyethylene, PET, PVC, polypropylene, nylon, polystyrene, ABS and other styrenic resins. The Port Arthur fire could limit feedstock availability, which would tighten markets for downstream resins.
``The ethylene market already was tight, and the Huntsman outage will ensure that it remains tight,'' said Mark Eramo, an ethylene market analyst with Chemical Market Associates Inc. consulting firm in Houston.
CMAI estimates that 7.5 percent of U.S. ethylene capacity will be offline in May as a result of the Huntsman outage and ongoing maintenance at a Port Arthur plant operated by BASF Corp. and Total Petrochemicals USA Inc. That's down from a 12.5 percent offline rate reported in May because of similar shutdowns, but Eramo said May ethylene demand is expected to be much stronger than it was in April.
``We're already seeing higher prices in spot deals for ethylene,'' Eramo said in a telephone interview. ``Having two [ethylene] plants down isn't unusual for this time of year, but demand is off and running. It looks like buyers are starting to stock up in advance of another hurricane season.''
Hurricanes Katrina and Rita hit the Gulf Coast in fall 2005, knocking out more than half of the region's petrochemical capacity and limiting availability of many resins for several months. The storms' impact also caused prices to rise substantially on many commodity plastics. Prices have receded since then but remain above pre-hurricane levels. Many resin makers already had increase attempts on the table for May and June, and a number of market watchers expect the Huntsman fire to strengthen those moves.
A challenging scenario, according to Eramo, could be one where plastics processors are paying higher prices for raw materials at a time when demand from retailers like Wal-Mart is decreasing as consumers are forced to spend more on high-priced gasoline.
Eramo added that higher ethylene prices might attract imports and prevent the U.S. from exporting. Soft prices in early 2006 were allowing this balance to recover, but the Huntsman fire could bring that recovery to a stop.
