As the Houston area begins to recover from Hurricane Harvey, resin makers and processors are coping with expectations of reduced supplies.
The storm hit the region on Aug. 25, bringing heavy rains that flooded much of the area, which is home to many resin and feedstocks plants. Many of those plants remained down or were working to restart as of Sept. 1.
Many suppliers declared force majeure sales limits because of reduced production.
"Our remaining Texas and Louisiana manufacturing sites continue to be operational at this time," a Dow Chemical spokesman said. "However, due to the limitations of infrastructure and logistics in the region, some sites may have to adjust production rates."
"Formosa will provide further information on supply quantities," Formosa Plastics Corp. USA officials said in an Aug. 28 letter to customers. "However, it is anticipated that this information will not be available for several days as we continue to assess the full impact of the hurricane and our ability to supply products."
Short-term price increases are expected on some materials. For polyethylene, a 3 cent hike that had been unsuccessful in August now is in place. Some PE suppliers have announced an additional 4-cent increase effective Sept. 1. Some PVC makers have announced a 5-cent increase attempt effective Oct. 1.
Consulting firm Petrochem Wire estimated that, as of Aug. 31, just over 60 percent of U.S. ethylene capacity remained down. Ethylene is a key feedstock used in PE, PVC and related materials.
Market analyst Phil Karig said it will probably take a few weeks to fully assess the damage to resin and feedstock plants along the Gulf Coast. The most likely scenario at this point is that at least some plants will be down for an extended period of time, he said.
"As a result, resin price increases could be steeper and longer lasting than increases in the aftermath of past hurricanes, as resin producers grapple with balancing customer demand while their resin supply is pinched," said Karig, managing director of the Mathelin Bay Associates LLC in St. Louis.
He added that resin consumers "will scramble to navigate the force majeure announcements that are sure to follow" and that the widespread nature of the flooding "is also likely to constrain the labor supply available for repairing and restarting plants, as some workers deal with damages to their own homes or volunteer for general hurricane relief efforts."