INSIGHT: Chem glut, weaker demand to offset busy hurricane season

HOUSTON (ICIS)–Chemical plants along the US Gulf Coast will face another active hurricane season, but any potential disruptions will be partially if not entirely offset by excess global capacity and weaker demand growth.

• Meteorologists expect up to 10 hurricanes in the Atlantic basin during this year’s hurricane season, which starts in June and lasts through November
• The global supply glut of plastics and chemicals will continue in 2025 and beyond
• Global plastic and chemical demand will weaken because of tariffs and a prolonged manufacturing downturn

BUSY HURRICANE SEASON
Meteorologists expect a busy hurricane season as shown in the following table:

	AccuWeather	CSU	US	30-Year Average
Hurricanes	7-10	9	6-10	7
Major hurricanes	3-5	4	3-5	3
TOTAL	13-18	17	13-19	14

*Major hurricanes have wind speeds of at least 111 miles/hour (178 km/hour)
Sources: AccuWeather, Colorado State University (CSU), US National Oceanic and Atmospheric Administration (NOAA)

Hurricanes directly affect the chemical industry because plants and refineries shut down in preparation for the storms, and they sometimes remain down because of damage. Power outages can last for days or weeks.

Hurricanes shut down ports, railroads and highways, which can prevent operating plants from receiving feedstock or shipping out products.

Most US petrochemical plants and refineries are on the Gulf Coast states of Texas and Louisiana, making them prone to hurricanes. Other plants and refineries are scattered farther east in the states of Mississippi, Alabama and Florida, a peninsula that is also a hub for phosphate production and fertilizer logistics.

Hurricanes can shut down LNG terminals, most of which are concentrated along the Gulf Coast. If the outages last long enough, it can cause a local glut of natural gas and a decline in prices. US prices for ethane tend to rise and fall with those of natural gas, so a prolonged shutdown of LNG terminals would lower feedstock costs – especially if the hurricane also shuts down ethane crackers.

Petrochemical plants outside of the US are becoming increasingly reliant on that country’s exports of ethane, ethylene and liquefied petroleum gas (LPG), a feedstock for crackers and for propane dehydrogenation (PDH) units. Most of these terminals are on the Gulf Coast, leaving them vulnerable to disruptions caused by hurricanes.

HOTTER SUMMER COULD REDUCE THROUGHPUT AT GAS PLANTS
Extremely high temperatures can reduce the throughput of Texan natural gas processing plants, which extract ethane and other natural gas liquids (NGLs) from raw natural gas. Such reductions took place in 2024 during the peak summer months of August and September, when temperatures are typically at their highest in many parts of Texas.

Texas has natural gas processing plants in the western and fractionation hubs in the eastern parts of the state. For both regions, summer temperatures should be 1-2°F higher than normal, according to AccuWeather, a meteorology firm. That amounts to 0.6-1.0°C higher.

CHEM OVERCAPACITY GROWS BIGGER
The effect of any shutdowns of chemical plants will be blunted by excess global capacity. Companies have continued to start up new plants, despite the oversupply of plastics and chemicals.

ICIS FORECASTS WEAKER 2025 DEMAND GROWTH
Any disruptions to chemical production would take place amid weaker demand growth.

ICIS forecasts that 2025 demand growth for most commodity plastics will slow from 2024 and remain well below levels in 2018 and earlier.

The following chart ICIS past demand growth rates and forecasts for 2025.

Source: ICIS

Growth rates are slower in part due to uncertainty caused by US trade policy. ICIS expects global GDP to expand by 2.2% in 2025, down from 2.8% in 2024. Global manufacturing is expected to contract globally. The following breaks down forecasts for national purchasing managers’ indices (PMI). Anything below 50 indicates contraction.

Sources: Institute for Supply Management, S&P Global and JP Morgan

RESUMPTION OF TARIFFS WOULD FURTHER WEAKEN DEMAND
In July, the US could resume imposing its higher reciprocal tariffs against much of the world, including the EU, following a 90-day pause announced in April.

The EU is preparing a list of retaliatory tariffs that covers many US imports of commodity chemicals and plastics, including the following:

• Caustic soda
• Acetic Acid
• Vinyl acetate monomer (VAM)
• Polyethylene (PE)
• Polypropylene (PP)
• Polystyrene (PS)
• Acrylonitrile butadiene styrene (ABS)
• Polyvinyl chloride (PVC)
• Polyethylene terephthalate (PET)

The US and EU may extend the pause or reach a trade agreement that would do away with the need for retaliatory tariffs. But if the two sides fail to reach an agreement, then the EU’s retaliatory would likely reduce demand for US plastics and chemicals.

Demand for US plastics and chemicals could take another hit in mid-August if the US and China resume triple-digit tariffs following their 90-day pause.

The pause would expire right before hurricane season reaches its peak in the US.

Insight article by Al Greenwood

Thumbnail shows a hurricane. Image by NOAA.