INSIGHT: Impact from hurricane still lingers in US markets

11 September 2012 15:57  [Source: ICIS news]

By Brian Ford

HOUSTON (ICIS)--Hurricane Isaac is long gone, but the storm continued to make some ripples in chemical markets during the week following its passage.

Isaac blew across Louisiana 29-30 August, bringing winds of up to 80 miles/hour (129km/hour), torrential rain and flooding. The storm forced the shutdown of several chemical plants and complexes, many of which were still restarting during the week ended 7 September.

Those shutdowns had an impact on ethylene markets and downstream chemicals, as well as chlor-alkalis and styrenics.

US ethylene contracts for August rose by 4 cents/lb ($88/tonne, €69/tonne) to 46 cents/lb, market sources said on 5 September, following a jump in spot prices and slightly higher production costs last month.

The settlement, a nearly 10% increase from July, came after spot prices rose by 14% in August as a result of outages and reduced operations at some US crackers.

At least two units were taken off line in Louisiana last week as Hurricane Isaac swept through the state, leaving widespread power outages and flooding in its trail. The storm forced other crackers in the region to run at lower rates, further affecting monomer supply.

On 6 September, sources said polyethylene (PE) contracts ended August in a split settlement, with at least one producer settling at an increase of 3 cents/lb, while most other producers pushed through a 5 cent/lb increase.

Feedstock ethylene costs offered strong support for the full increase, according to one producer. Also, PE supply disruptions caused by Isaac contributed support to higher prices, sources said.

With the increase, prices for linear low density polyethylene (LLDPE) butene film were at 67-70 cents/lb delivered (DEL), low density polyethylene (LDPE) film prices were at 76-79 cents/lb DEL and high density polyethylene (HDPE) blow moulding prices were at 65-68 cents/lb DEL, for small volume buyers, as assessed by ICIS.

US ethylene oxide (EO) contract prices for August were also assessed higher on the back of the ethylene contract increase. Contracts for August were assessed higher by 3.20 cents/lb on 7 September. EO was assessed at 49.80-59.30 cents/lb.

The rise in spot ethylene may have also been a factor in the rise of ethyl acetate (etac) prices during the first week of September. US ethyl acetate (etac) contract and spot prices moved up 5 cents/lb in September because of continued raw material increases, sources said on 4 September.

Sources added that etac contract prices jumped 5 cents/lb to 80-84 cents/lb, from 75-79 cents/lb previously. Spot prices rose by the same amount, to 76-80 cents/lb, from 71-75 cents/lb previously, also stemming from feedstock hikes.

Isaac was also cited as a factor in a fall in US propylene stocks and refinery operating rates for the last week of August.

Propylene inventories were at 5.002m bbl in the week that ended on 31 August, down by 3.7% from 5.194m bbl a week earlier.

In chlor-alkali markets, polyvinyl chloride (PVC) spot and export prices rose after outages caused by the storm tightened supplies.

Several US PVC producers have operations on the US Gulf coast, particularly in Louisiana. Although there was minimal damage, the PVC plants that were shut down remained off line for a period of days, constricting supplies. Spot prices are assessed at 42-46 cents/lb, while export prices are assessed at $920-950/tonne.

Firm PVC prices in the US and a slowdown in shipments from the US caused by Isaac were cited as factors in a 12% PVC price hike proposal in Brazil, and a 4 cent/lb increase in Mexico.

US caustic soda spot and export prices are assessed stable for the week ended 7 September, but market participants were discussing a set of price initiatives that would largely go into effect in October. The producers have cited restricted supply caused by unplanned shutdowns caused by Isaac.

Ripples from Isaac may even reach Europe, which has seen the highest styrene spot prices since July 2008 because of a lack of availability and a high level of demand.

“As a region that is net short of styrene, we are feeling the loss of US import volumes against the seasonally strong demand,” said a European producer. “Rebalancing will not happen before end Oct given the Hurricane Isaac issues, so only the high risk takers would delay buying for hope of lower prices next month.”

Styrene plants in Louisiana began restarts during the week following Isaac.

Total Petrochemicals said it restarted its Carville facility in Louisiana. The facility has a combined styrene capacity of 1.16m tonnes/year and a polystyrene (PS) capacity of 658,000 tonnes/year. Trade sources also said that Americas Styrenics’ 950,000 tonne/year St James facility in Louisiana restarted.

Indeed, most chemical plants that were affected by Isaac had either restarted or were in the process of doing so.

BASF's Geismar complex in Louisiana returned to normal production, along with Huntsman's isocyanates production, the companies said. BASF makes several products at its Geismar site, including MDI, toluene di-isocyanate (TDI) and butanediol (BDO), while Huntsman makes methyl di-p-phenylene isocyanate (MDI) at its Geismar plant.

Dow Chemical has resumed normal resuming operations at its complexes in Plaquemine and Taft.  Dow produces chlor-alkalis, ethylene and polyethylene (PE) among other products at the sites.

Additional reporting by William Lemos, Michelle Klump, Ken Fountain, Al Greenwood,  Leela Landress, Ron Coifman, Brian Balboa and Julia Meehan

($1 = €0.78)

By: Brian Ford
+1 713 525 2653

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