North American resin and feedstock markets continue to recover from Hurricane Harvey, with only isolated production problems and more concern centering on transportation and deliveries.
Harvey hit the Texas coast on Aug. 25, bringing heavy rains and flooding. IHS Markit said in a Sept. 13 report that the three major railroads in the area — Union Pacific Railroad, BNSF Railway and Kansas City Southern Railway — have effectively restored service on their networks, but delays linger.
"Service delays are expected, thanks to a backlog of freight and reduced train speed limits due to repair work," the Houston-based consulting firm said.
One resin supplier told Plastics News that the impact of Harvey and of Hurricane Irma, which hit Florida on Sept. 8, has caused "a nationwide shortage of available truck-load and bulk-truck capacity." Road freight demand is returning to Houston, according to IHS Markit, as immediate emergency relief gives way to longer-term rebuilding needs, which is putting more pressure on already rising truck rates.
Almost 75 percent of the polyethylene resin capacity that was taken down as a result of Harvey has been restored, according to a Sept. 11 report from David Barry of the PetroChem Wire consulting firm. "Polymer plants along the coast mostly escaped significant damage," he said.
In its report, IHS Markit said almost 25 percent of U.S. PE production capacity remained offline on Sept. 13, while another 30 percent of U.S. capacity was operating at reduced rates.
The most impacted PE production site appears to be Chevron Phillips Chemical's Cedar Bayou plant in Baytown, Texas, which makes high, low and linear low density PE. Barry said that site "experienced damaging floods as the nearby bayou crested several feet above what is considered a 500-year flood event."
He added that the plant, which makes numerous blow molding and rotational molding grades, is not expected to restart until at least November. Other market sources also told Plastics News that the Cedar Bayou plant had been impacted. Officials with CP Chem in The Woodlands, Texas, declined to comment.
Several PE sites continue to operate under force majeure sales limits. Market sources told Plastics News that Total Petrochemicals had lifted force majeure on PE, but company officials could not be reached to confirm that move.
"The immediate impact of the PE outages has been supply allocations, mostly set at 50 to 100 percent of historical volume, and higher spot prices," Barry said. "In specific cases where suppliers' inventories are in worse shape, the allocations have been steeper …and there have been reports of producers hoarding 'anything that melts' to help their prime customers through the supply crunch."
IHS Markit estimated that about 10 percent of U.S. ethylene production remained offline and that three or four crackers "were still idled and at different stages of the startup process."
For PE pricing, the storm already has allowed producers to enforce a 3-cent increase for August that at first had been unsuccessful. Four-cent increases now have been announced, with effective dates of Sept. 15 or Oct. 1, depending on the supplier.
For polypropylene, Barry said that there's been speculation that Harvey-related supply disruptions could linger for longer than PE.
"Unlike the PE industry, PP producers have no near-term supply expansions waiting in the wings, and a greater percentage of North American PP capacity was affected by Hurricane Harvey," he said.
Barry added, however, that almost all PP units that had been taken down have been restarted. IHS Markit estimated that less than 5 percent of North American PP remained down. Several PP makers also are operating under force majeure.
Tight supplies of propylene monomer — some of which was tight even before the storm — could drive PP prices higher. IHS Markit estimated that almost 60 percent of propylene assets in the region are either in the process of restarting or are running at reduced rates.
Increases of 7 cents per pound for polymer-grade propylene and of 11 cents per pound for refinery-grade propylene have been reported. Those prices typically have a strong impact on PP resin prices.
"If recent history is any guide, the volatility in propylene prices will crimp PP demand and invite the importation of both resin and finished goods," Barry said. IHS Markit added that "price pressure [on propylene] will be sharply upward from pre-storm levels, based on stronger derivative capability against limited supply."
They said that rail cars of PP resin are shipping out of the Gulf Coast but that there continue to be supply issues in specific cases where applications require specified grades. The PP market "is heavily focused on supply over price this month with a wide range of price premiums for September product," according to IHS Markit.
In the PVC market, Barry said that some vinyl chloride monomer production in Texas was still shut down two weeks after Harvey's landfall and that some PVC plants were running at reduced rates. IHS Markit said that Oxy Vinyls' VCM operations in La Porte, Texas, were back online, while that firm's operations in Ingleside and Deer Park, Texas are ramping up and expected to restart within the next week.
No major PVC/VCM plant damage was reported, but some PVC suppliers have announced 5-cent price hikes effective Oct. 1. The storm appears to have had little impact on the regional polystyrene market, with almost all resin and feedstock units continuing to operate during the storm.
Market analyst Craig Blizzard of Blizzard Consulting Group in Chevy Chase, Md., said resin makers now have better ways to assess and monitor their production than they did in 2005 when Hurricane Katrina blasted the Gulf Coast. That event led to major price increase announcements within days of the storm.
"Now they can get to their plants before the storm hits and take precautions," said Blizzard, who worked for polyolefins leader LyondellBasell Industries and its predecessor companies. "So I don't think they're in as bad shape and will take a wait-and-see approach to price increases."
Blizzard was working in the industry when Katrina hit and recalls having "many sleepless nights."
"We knew one company in that [Gulf Coast] area that had all of its computers in a basement," he said. "I don't think people do that anymore."
At the macro level for feedstocks, West Texas Intermediate crude oil was at $46 per barrel when Harvey hit and was just under $50 in early trading Sept. 15 for an increase of almost 9 percent.
Natural gas, used as a feedstock to make most North American PE, was at $2.92 per million BTUs on Aug. 25 and has bounced around since. It was at $3.03 in early trading Sept.15 for an increase of almost 4 percent vs. its pre-storm level.
