Materials firms make their way back after Harvey

Plastics materials production is improving in the aftermath of Hurricane Harvey, but challenges remain.

In a Sept. 7 update, the IHS Markit consulting firm in Houston said that just over 40 percent of U.S. polyethylene resin capacity was down or constrained. That's an improvement from an earlier estimate of 60 percent at peak impact from the storm, which hit the Texas coast on Aug. 25, bringing heavy rains and flooding.

IHS also said Sept. 8 that about 90 percent of North American production of polypropylene resin is back online or in startup mode. The firm described that level as "a remarkable recovery," since only 40 percent was online a week earlier.

PVC resin plants operated by Oxy Vinyls in Pasadena and Deer Park are running at reduced rates, according to the report. Several plants making benzene — a feedstock for styrene monomer used to make polystyrene resin — also are in the restart process.

For ethylene feedstock used to make PE, PVC and related materials, IHS estimated that 54 percent of capacity remains offline. Industry estimates previously placed that level at a little more than 60 percent.

In a Sept. 5 letter to customers, officials with Formosa Plastics Corp. USA said that "steady progress" starting up facility operations in Point Comfort continues, and that personnel have resumed regular work schedules. Livingston, N.J.-based Formosa makes PE, PP, PVC and related feedstocks in Point Comfort.

"In-plant utilities are in operation and one olefins cracker, one polypropylene line and several polyethylene lines have begun the startup sequence," officials said. "At this time, two polypropylene lines are fully operational with an approximate capacity of 25 percent of our regular total capacity for polypropylene."

Executives with two top North American resin distributors said the situation in Texas is improving somewhat.

"The resin producers had an orderly shutdown," said Ed Holland, president and CEO of the M. Holland Co. in Northbrook, Ill. "They had plans in place and moved inventory out of danger zones.

"From that standpoint, I think we're ahead of where we were with Hurricane Katrina [in 2005]. It looks like manufacturing equipment has fared better than it did with Katrina."

"Things are still chaotic, but logistics are improving," said David Dever, distribution sales vice president with Osterman & Co. in Cheshire, Conn. "I feel a little bit better than I did earlier in the week."

Another distribution executive in the Midwest U.S. said Harvey is having a larger impact on the plastics market than Katrina did because Houston is "a much larger polymer and intermediates chemical hub" than New Orleans, which was hardest hit by Katrina.

M. Holland "is building internal systems to match up current demand with inventory and supplies," Ed Holland said. "We need to know how to allocate resources. Maybe we can send a customer a bulk truck instead of a railcar."

He added that his firm's Houston-area resin inventory was not damaged in the storm and that roads and railways in the Houston area "are improving, but not out of danger completely."

IHS said Sept. 8 that Houston-area railroads "appear to have made significant progress in restoring service." It added that BNSF Railway reports service restored to most of its system, but also expects an extended outage from major bridge repair on a main route between Houston and Corpus Christi, Texas.

For trucking, IHS said that capacity "remains tight, as motor carriers catch up on backlogs from a week-long disruption." It added that many drivers and trucks are diverted to hauling relief and construction supplies, and that traffic congestion is reducing driver productivity.

Osterman "is in pretty good shape" on resin inventory, Dever said, and is trying to help customers, including some who only had 7 to 10 days of material on hand when the storm hit.

"The biggest stress and strain is logistics," he added.

The Midwestern distributor said Asian suppliers of commodity resins might be able to bring in material to North America as a result of outages in the region. He added that his firm has some customers "saying that they need another truckload of resin, but it's not always available."

Another issue that could be hitting resin markets now, according to Stephen Tarnell at the Tarnell Co. LLC consulting firm in Providence, R.I., is lower-than-normal inventory at PE and PP processors who were anticipating new capacity coming on this summer, possibly bringing with it lower prices.

"They've been waiting for this new capacity to come online, and it's pretty likely that a good deal of the consumers are under inventoried at this point," he said. "So this has turned out to likely be a very scary perfect storm, because [resin] producers have been trying to push through price increases, which the market has resisted with polypropylene and polyethylene, because everyone is waiting for this new capacity.

"They've been keeping it lean, and now all of a sudden, the capacity is interrupted," Tarnell added. "There's just not going to be adequate capacity immediately, so there are going to be force majeures.

"By and large, there will be short [resin] supply, and people are going to be scrambling to get it. That's going to have a significant impact throughout the marketplace, and not just in the short term. It'll affect ultimately what the cost of pipe is and show up in packaging."

Officials at M. Holland and Osterman are making the best of a difficult situation.

"We're telling people not to panic," Ed Holland said. "We can manage through this."

"This is a great time to show our customers that we can supply them, even in a challenging situation," added Dever at Osterman.