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Market danger set to lurk in the Gulf

ICIS, Uncategorised

Time to keep a watchful eye on the Gulf of Mexico.

Apropos of the approaching peak of the Atlantic hurricane season, there is growing chatter among meteorologists about the possibility of a significant storm building in the southern Gulf’s Bay of Campeche by early next week, with the possibility that this could evolve into a rainfall-intensive hurricane that makes landfall in Mexico or anywhere along the Texas coast.

There’s been increasing noise about this possibility for the last couple of days, but when Space City Weather managing editor (and Cheniere meteorologist) Matt Lanza and Harris County Flood Control District meteorologist Jeff Lindner start publicly discussing the situation on Twitter, it’s time to start doubling up on vigilance and preparations just in case the possible becomes the probable. They know their audience, and that them talking about the possible storm “looking wet” and that Lanza is “never crazy about these kind of setups” will lead to increased scrutiny of the situation, which is warranted by Gulf Coast residents as well as the petrochemical industry.

As mentioned earlier this summer, our chemical and polymer markets are not hurricane-ready. While some markets such as polyethylene (PE) are starting to build healthy inventories, many others such as propylene, butadiene (BD), base oils, acrylonitrile butadiene styrene (ABS) and nylon 6,6 remain challenged on the supply side. With pricing of several chemical and polymer materials at elevated to near-record highs, long-term outages induced by tropical weather could fuel stratospheric price rises that downstream supply chains and consumers cannot easily afford. I’m not sure anyone truly wants to see $4,000/tonne ($1.81/lb) US polypropylene (PP), but that is not out of the realm of possibility of a storm takes a significant portion of Gulf Coast propylene and/or PP capacity offline for at least three weeks.

Now is the time for supply chains exposed to the risks of US Gulf Coast chemical and polymer production to revisit their storm-related plans, understand their capabilities and limitations should ethylene, PE or other important raw material capacity be taken offline, and to create contingency plans for worst-case scenarios.

ICIS through its News channel and periodic updates from Chemical Data analysts and ICIS editors will be market participants’ best source for the latest on impacts from the Gulf Coast’s tropical weather.

Keep an eye on the Gulf and possible supply chain impacts by keeping an eye on ICIS.

Disclaimer: The views in this blogpost should in no shape or form be taken as actual forecasts and are my personal views only.