A polar storm in the US has triggered a surge in global chemical prices
Polar storms in the US have so far shut down 90 per cent of US polypropylene capacity and 67 per cent of ethylene capacity, damaging other key products and triggering a surge in global chemical market prices, industry experts say.
ICIS Chemical’s Will Beacham added that more chemical plants and refineries along the Gulf Coast were hit by prolonged power and feedstock outages caused by ice and snow, which disrupted logistics networks.
To date, ICIS has reported more than 60 storm-related plant shutdowns, and data analysis using the ICIS Supply and Demand Database shows that most sectors of the Gulf petrochemical industry have been severely affected.
In terms of volume, the biggest hit was ethylene, with 26 million tons of offline capacity, or 67 percent of the U.S. total. About 11 million tonnes (50 per cent) of propylene capacity is also out of production and many of the region’s refineries are reducing production. More than 2 million barrels a day of U.S. refining capacity was shut down.
In percentage terms, the most affected major commodities are epichlorohydrin (100% offline in the U.S.), propylene oxide (100%), toluene diisocyanate (100%), ethylene glycol (90%), polypropylene (90%), propylene glycol (88%), acrylonitrile (73%), and styrene butadiene rubber (71%).
Power outages are straining global markets already suffering from shortages and rising prices. Problems with global container transport systems, plant shutdowns and healthy downstream demand have led to tight supplies, particularly for propylene and polyethylene chains.
Propylene and polypropylene are likely to be among the hardest hit by the storm, as markets are already in turmoil. The coronavirus pandemic has reduced demand for transport fuels and led to refinery closures or production cuts, particularly in Europe and the United States.
The closures have had a knock-on effect on supplies of propylene and polypropylene, causing prices to soar. With U.S. polypropylene production highly concentrated along the Gulf Coast, even temporary capacity constraints would have a significant impact on an already tight market.
US propylene prices are at 10-year highs and inventories are about half what they were a year ago. Consumption has outstripped production because of a decrease in propylene production last year.
US polypropylene stocks hit a seven-year low in late 2020, partly due to a rebound in demand and monomer supply constraints. The weather event was preceded by production problems.
The polyethylene market is not so bad. Constraints in packaging supply and demand have supported the global market through the pandemic, with logistics challenges and outages leading to shortages and soaring prices in 2021
The global polyethylene market is likely to tighten further as nearly two-thirds of ethylene production capacity in the US goes offline.
Lucite demolished its Beaumont, Texas, plant as a result of the storm, and the U.S. supply of methyl methacrylate (MMA) is expected to be further constrained. Strict restrictions on raw material acetone continue to limit production. Due to the high cost, I heard that manufacturers will impose a temporary acetone surcharge on orders starting this month.
Demand picked up in the world’s largest chemicals market as the Lunar New Year holiday ended on February 17.
In Africa, sellers of polyethylene and polypropylene from a variety of sources have withdrawn their offers and the market is expected to rebound strongly after the holiday in anticipation of disruption to US exports.
Monoethylene glycol (MEG) prices surged 11 per cent in Asia on Thursday, the biggest one-day gain on record, underpinned by tightening global supplies.
European prices were also boosted by the storm. Upstream price increases and bullish sentiment have pushed benzene prices higher, with styrene now at its highest level since April 2018.