Hurricane Harvey
​Update:  September 6, 2017

Don't Panic.

TRANSPORTATION

PORTS:  The port of Corpus Christi is open with no restrictions.  The port of Freeport is now open 24 hours but as of 4:00 pm yesterday transits will be limited to vessels with a draft of 38 feet or less.  The Houston Ship Channel is open but with restrictions.  Ships with up to 40 foot draft are allowed up by the ExxonMobil refinery at Baytown and only barges are allowed in the upper channel.  Restrictions will be released as officials observe ships coming in with no navigational difficulties.  Ports in Beaumont and Port Arthur were officially still closed but sources say the Coast Guard was allowing some barge traffic in and may consider allowing ships to enter today.  The Galveston Bay port and channels, along with the Texas City channel, turning basin and industrial canal, are all open.

ROADS/RAILWAYS:  Trucking is still being impeded by flooding in and around the Houston area.  Some industrial/commercial truck capacity is being used by relief efforts and sources say inbound rates to Houston are rising by double digits on spot market load boards.  The impact may last months, not weeks, and truck rates will likely increase most significantly locally but are also expected to go up nationwide.  The Union Pacific railway is expected to have one or both of its lines between Houston and Beaumont reopened by Wednesday. Their Baytown line reopened on 9/4/17 and service was restored to the various plants in Mont Belvieu and Baytown as well as to several storage facilities.  Flooding continues to impede repairs in the Beaumont, Orange and Port Arthur areas.  Kansas City Southern reopened its track between Houston and Laredo on 9/3/17, but their Beaumont subdivision remains closed but with conditions improving.  According to data just released by the Association of American Railroads, US chemical railcar traffic declined a sharp 21.3% year-on-year for the week ending 9/2/17 due to Harvey.


PIPELINES/REFINERIES/PRODUCTION

Much happened over the Labor Day holiday to bring good news to the refining sector.  Sources report at least 2 of the 20 affected refineries (Valero-Corpus Christi and Texas City plants) were officially at normal run rates as of yesterday and several others are expected to joint them over the next 2 days.  Only 5 Gulf Coast refineries were neither operational nor actively starting up as of 9/4/17, but 4 are expected to begin the process this week.

ExxonMobil’s Beaumont refinery remains shuttered due to flooding, but it has begun restart operations at its PE units.  Per a company statement, ExxonMobil is making “significant progress” in restarting its Baytown chemical facilities.  Its fuel terminals in the Houston region are open and supplying gasoline and diesel to customers.  Motiva Enterprises said yesterday it was in the initial phase of restarting its Port Arthur refinery and expects to return to about 40% production by the end of this weekend. 

Restarts have begun at olefins units that represent about 50 million lbs/day of ethylene capacity.  In total, it is estimated that the storm shuttered about 100 million lbs/day of ethylene production.  Sources claim no significant effect of the ethylene disruption has been seen so far because a comparable amount of demand was lost and it appears that on-site downstream units are restarting ahead of or simultaneously with the olefins units.

Formosa restarted its Olefins 2 unit at Point Comfort and is estimated to be operating at 70-80%.  A restart began yesterday of one PP line and several PE lines and sources say ethylene production at the plant is being allocated between PE and vinyls units.  INEOS also began a restart on its Olefins No. 1 unit in Chocolate Bayou on 9/5/17 but didn’t specify a start-up date or when it would return to full rates.  Emissions are expected between September 5th and 6th.

LyondellBasell’s chairman/CEO reported yesterday that its plants in the area (9 on the US Gulf Coast) had no major physical damage from wind or flood and some even continued to operate during the storm at low rates while others were shut down.  The company is working through various stages of restarts and expected to be “largely back to normal” by the end of the month or early October.

Offshore as of 9/1/17 about 9% of offshore crude oil production and 13% of natural gas production in the Gulf remained shut-in.  That has since been reduced to an estimated 7% for crude and 8% for natural gas.

Onshore, most if not all pipelines have reopened and Eagle Ford operators are reporting a quick ramp up in production nearing pre-storm levels.  Very good news!

As of 9.4.17, NGL operations at Mont Belvieu and the Permian Basin are quickly returning to normal with Enterprise Products Partners reporting it has restored service at substantially all of its major assets impacted by the storm.  Its marine terminals and pipelines have also mostly returned to normal service.  NGL production from the refineries is also quickly returning to normal as the affected plants in Houston and South Texas are returning to normal operations.


FORCE MAJEURES/INCREASE ANNOUNCEMENTS

 POLYETHYLENE:  Thanks to Harvey, many August PE contracts were heard increasing by the 3.0 cpp that producers have been seeking for the last couple of months.  Several producers, including ExxonMobil and Chevron Phillips, have already jumped on the bandwagon with their announcements this week to increase PE prices by 4.0 cpp effective September 15th.  We expect most of the announcements for further increases to come out before the end of this week.  PE force majueres are currently in effect at Formosa (Point Comfort) and LyondellBasell (Matagorda, Chocolate Bayou & La Porte).  Force majeure on VAM (vinyl acetate monomer) has been declared by Celanese and LyondellBasell (La Porte).
 
Dow has notified its customers in Brazil that it is seeking a second September price increase for all PE resins amounting to R300/tonne (about $96/tonne) effective September 15th.  This is in addition to the R300/tonne increase announced for PE sales effective September 1st.  No justification was given in the letters to customers but is being interpreted as a reaction to potential tightening of PE supply in the US Gulf Coast.  Braskem also is seeking a R272/tonne ($87/tonne) price increase for PE in Brazil effective September 1st.
 
POLYPROPYLENE:  Sources say PP buyers are looking to global resin suppliers and traders to keep them going during an extended Gulf Coast supply disruption.  Some say a delay of two weeks for railcar shipments is expected and supply won’t recover until mid-September.  The market is already seeing higher wide spec prices and spot prime material has already exceeded contract pricing levels.  August PP contracts were heard settling up 0.5 cpp in tandem with the 0.5 cpp increase in the August feedstock propylene settlement.  PP force majeures are currently in effect at Formosa (Point Comfort) and INEOS (Chocolate Bayou); ExxonMobil has PP under sales allocation at all of its Gulf Coast facilities.
 
POLYSTYRENE:  Add Americas Styrenics to the list of PS companies seeking a September 1st increase.  INEOS and Total Petrochemicals had previously put a 4.0 cpp increase on the table for September.  Amsty’s increase is stated as 2.0 cpp, but this announcement was made prior to the threat of Harvey.  AmSty had also nominated a 2.0 cpp increase effective August 1st.  August PS contracts were heard mostly rolling over but market sources say AmSty may have gotten part of the increase on some non-competitive accounts.  A force majeure is in effect for styrene monomer from LyondellBasell.  A force majeure is also in effect for BD (butadiene) from LyondellBasell (Channelview).
 
PVC:  Currently, all Westlake operations in the Gulf (olefins, CA & derivatives, PE, PVC, Compounding, etc.) are running at full rates.  Shintech is confirmed to be operational at both Texas and Louisiana locations.  A force majeure remains in effect for all chlor-alkali, specialty PVC, and PVC (including pipe) from Formosa’s Point Comfort plant.  OxyChem has also declared force majeure on PVC from its Pasadena and Deer Park locations.  Olin’s plan in Freeport has a force majeure in effect for all chlor-alkali.  Axiall and OxyVinyls (US & Canada) have announced their intent to increase PVC prices by 5.0 cpp effective October 1, 2017. 
 
PET:  M&G Polymers just announced today they are seeking a 7.0 cpp increase on all grades of its PET resin in the US, effective September 1st.  This would apply to supplies from its Apple Grove, WV plant.  The company cited widespread production disruptions to raw materials and logistics issues stemming from Hurricane Harvey as the reason for the increase.  Indorama Ventures announced yesterday they are seeking a 6.0 cpp increase for PET resin in the US, effective September 1st.  A force majeure remains in effect at LyondellBasell’s (Equistar) Bayport facility for ethylene oxide (EO), ethylene glycols (EG), propylene glycol (PG), glycol ethers, & ethanolamines.
  

We have also heard that US spot prices for many commodity resins have risen sharply over the last week due to the supply/logistics constraints and that some material just could not be found.  Those who were lucky enough to source some had to pay the price to keep their operations running.

US Olin reported today it has shut down its phenol/acetone plant in Oyster Creek, TX due to lack of feedstock availability and force majeure has been declared.  No expected restart date was available.
  

For more information on the forces impacting the global plastics and related industries contact customercare@townsendsolutions.com .