Three of five major commodity resins saw price hikes in August, but more increases could be on the way as the industry deals with the fallout of Hurricane Harvey.
The most immediate impact of the storm was the pushing through of a 3-cent-per-pound polyethylene increase that was thought to be unsuccessful for the month. But Harvey's Aug. 25 arrival, and subsequent rains and flooding, took down most of the region's PE capacity, which still is working to come back on in mid-September.
Those outages tightened PE supplies and allowed the hike to take hold. Prior to that, regional PE prices had been flat for two straight months after rising 3 cents in May. Regional PE makers now are seeking hikes of 4 cents effective Oct. 1. Many resin makers also continue to operate under force majeure sales limits.
Although resin and feedstock plants are reporting only isolated production problems, more concern is centering on transportation and deliveries. The IHS Markit consulting firm said in a Sept. 13 report that the three major railroads in the area have effectively restored service on their networks, but delays linger.
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.
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. The PetroChem Wire consulting firm said that site experienced damaging floods as the nearby bayou crested several feet above what is considered a 500-year flood event.
It 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.
U.S./Canadian PE sales were mixed in the first seven months of 2017, according to the American Chemistry Council. Sales of high density PE in the region were down 3 percent in that period, as a domestic sales gain of almost 4 percent was wiped out by a drop of 26 percent in export sales.
Low density PE sales in the region ticked up 2 percent in those seven months, with a domestic sales drop of 1 percent negated by an export sales gain of more than 11 percent. In linear low, regional sales grew almost 2 percent as domestic growth of more than 4 percent was lowered by a 6 percent drop in export sales.