US chem officials continue Gustav preparations

28 August 2008 23:41  [Source: ICIS news]

WASHINGTON (ICIS news)--The US chemical sector kept a wary eye on Gustav on Thursday as the tropical storm headed toward Jamaica and appeared to be aimed at the US Gulf coast as it strengthened into a hurricane.

Chemical leaders held a conference call on Thursday with Department of Homeland Security (DHS) officials to plan for landfall by Gustav on the Gulf coast, and another conference was likely Friday.

Tropical Storm Gustav was expected to weaken as it crossed Jamaica but would then strengthen to become a hurricane as earlier as Friday, the US National Hurricane Center said.

Ted Cromwell, senior director for security and operations at the American Chemistry Council (ACC), said he and other industry officials spoke with DHS managers earlier on Thursday to coordinate preparation and recovery measures.

“We’ve already been talking with DHS officials several times,” Cromwell said of ACC and other industry members of the Chemical Sector Coordinating Council, an advisory panel to the department.

“Facilities along the Gulf coast are already taking their first steps, and of course the offshore energy folks are well into evacuating their people from the rigs,” he said.

“The coordination and communication work with DHS and FEMA [the Federal Emergency Management Agency] is much improved since the hurricanes of 2005,” Cromwell said.

He said various petrochemical and chemical production assets along the Gulf Coast have begun to shut down, reduce feedstock and product inventories and move non-essential personnel out of harm’s way.

“But there is only so much that can be done until we have a better idea of where Gustav is going to make landfall,” Cromwell noted.

Polypropylene (PP) and polyethylene (PE) buyers were faced with the choice of either building inventory now and having prices drop sharply next month, or continue operating with low inventories and risk a resin shortage should a storm disrupt deliveries, sources said.

A PP seller said some major customers were looking to secure more resin this week as the storm threat emerged, and converter operations could be severely curtailed for a few days because of preexisting low inventories.

However, PE buyers said the main threat from the storm was that supplies would tighten and prices would not fall as much as expected in September.

“Everything could change in a heartbeat with a hurricane,” said one buyer. “Before this storm popped up I was anticipating material getting long.”

Some converters might actually welcome a storm and a tighter resin market, a trader said, because they still needed to sell off high-cost finished goods inventories before resin prices plummet.

Producers PE and PP inventories have risen sharply since the start of the third quarter, according to industry data.

At 17:00 Eastern Time (21:00 GMT) on Thursday, Gustav was located 15 miles (25km) east-northeast of Kingston, Jamaica, moving west at 6 miles per hour (mph), according to the National Hurricane Center. Maximum wind speeds were 70 miles/hour, the centre said.

The centre said it expects the storm to regain hurricane status as it moves further into the Gulf of Mexico and likely will hit the central US Gulf coast at Louisiana as early as Monday.

“We have another conference call with DHS tentatively set for tomorrow, but depending on how Gustav moves we may put that call off to Saturday,” Cromwell said. 

“We’ll have to see where the storm track is tomorrow,” said, adding:  “Gustav is setting the pace.”

Gustav prompted PPG Industries facilities in the Gulf of Mexico region to institute additional hurricane-preparedness efforts, the coatings manufacturer said.

PPG makes chemicals in La Porte, Texas, and Lake Charles, Louisiana. About 90 employees work at the La Porte plant, while the Lake Charles complex employs about 1,300 people. It also has paint manufacturing facilities in Houston and Waller, Texas.

Shell and Motiva (a joint venture between Shell and Saudi Refining) said they also have been has been keeping watch.

“In advance of a storm, all critical plant functions are considered, including computing services, communications, utilities, and health, safety, and environment,” Shell and Motiva said in a statement. “Shell and Motiva also assess the potential impact on deliveries of crude oil and petrochemical feedstocks, outgoing distribution of products, and onsite inventories.”

(Additional reporting by David Barry, Brian Ford and Al Greenwood)

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