Resin-producing plants along the Texas coast were restarting last week after Hurricane Ike blew through the region Sept. 13.
And even though no plants reported major damage, power outages and transportation problems could tighten North American resin supplies for the next few weeks.
In a Sept. 16 letter to customers, Dow Chemical Co. said it could take as long as four weeks to resume operations at its plants in Louisiana, and eight weeks to restart plants in Texas. Midland, Mich-based Dow has 3 billion pounds of annual linear low density polyethylene capacity and 650 million pounds of high density PE capacity in Louisiana. In Texas, Dow operates capacity for 1.5 billion pounds of LLDPE, 1.1 billion pounds of LDPE, 880 million pounds of polypropylene and 200 million pounds of HDPE.
Some Dow resins will be placed on allocation as a result, meaning customers may not receive all of previous orders, the letter said. It did not specify which resins will be affected.
Glenn Wright, Dow's commercial vice president of basic plastics in North America, said in the letter: ``Due to the hurricanes, Dow's ability to supply most plastics resins has been severely impacted. The status of these [resin] startups depends on such factors as facility conditions, raw material availability, power supply [and] transportation capability.''
As of Sept. 17, shutdowns still affected 72 percent of North American PP capacity and 64 percent of its HDPE output, according to an estimate from Chemical Market Associates Inc. in Houston. More than 21 percent of North American PVC production was down as well, CMAI said.
Shutdowns also continued for 55 percent of regional LLDPE capacity and 44 percent of LDPE capacity, the report said.
ExxonMobil Chemical Co. seemed to do the best job of weathering the storm. According to CMAI, most of ExxonMobil's HDPE and LDPE output was fully operational Sept. 17. That adds up to 2 billion pounds of HDPE and 1.9 billion pounds of LDPE.
Other resin makers back in action as of Sept. 17, according to the CMAI report, included:
c Flint Hills Resources LP, with 750 million pounds of PP capacity in Longview, Texas.
c LyondellBasell Industries AF SCA, with 1.4 billion pounds of PP capacity in Lake Charles, La.
c Pinnacle Polymers, with 950 million pounds of PP capacity in Garyville, La.
Even if resin supplies tighten, that might not affect price decreases anticipated by many processors for September. That's because producer inventories were high coming into the month, while processor demand was low, as it has been for most of the year.
``There might be a slight peak [in pricing] right now because of nervousness,'' said Ronald Coifman, a resin market analyst with Townsend Polymer Services & Information in Houston. ``But, if anything, it will be temporary. There shouldn't be a long-term change in the resin markets.''
Access to electricity remains a key issue. Coifman estimated that 60 percent of the Houston area remained without power Sept. 17, affecting shipping logistics as well as employees' ability to get to work.
``It could be a couple of weeks before full power is restored,'' he added.
But the lack of power should not prevent PE prices from falling this month, according to Mike Burns, a market analyst with Resin Technology Inc. in Fort Worth, Texas.
``This is totally different from when [Hurricane] Katrina hit in '05,'' said Burns. ``At that time, we had low polyethylene inventory and high feedstock costs. Now, prices are dropping even though we've had two hurricanes in less than a month and August was one of the largest polyethylene inventory builds on record.
``There may be some logistics problems [because of the storms] but that shouldn't stop [PE] prices from softening.''
Officials with Livingston, N.J.-based Formosa Plastics Corp. USA said the firm's major plastics and petrochemicals plant in Point Comfort, Texas, was in the process of restarting Sept. 15. The plant is a major producer of PP, PVC and numerous plastic feedstocks. Formosa's PVC plant in Baton Rouge, La., also was in the process of restarting in the wake of Hurricane Gustav, which struck the Louisiana coast earlier this month.
Dow was preparing to restart its PP production in Freeport and Seadrift, Texas, as of Sept. 17, according to the CMAI report. Ineos Group was doing the same at PP plants in Alvin and Deer Park, Texas.
Exxon Mobil Corp. ExxonMobil Chemical's parent firm also had donated $5 million for disaster and relief assistance for communities affected by Hurricane Ike.
ExxonMobil employs 16,000 in Houston and surrounding areas. The firm earlier had donated $1.5 million for relief efforts in Louisiana following Hurricane Gustav.