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Tropical Storm Francine could Impact US Resin Production and Markets
September 09, 2024
Plastics and Petrochemical market participants have turned their attention to the US Gulf Coast as a tropical disturbance has rapidly developed into Tropical Storm Francine, the sixth named storm of the 2024 hurricane season. The storm gathered strength in the exceptionally warm waters of Mexico's Bay of Campeche and will likely grow into a serious and potentially dangerous hurricane by the time it makes landfall on Wednesday somewhere along the Texas / Louisiana border.
As of Monday afternoon, Francine was packing sustained winds of 65 mph and moving on a north-northwest trajectory at a slow 7 mph, providing ample time for the storm to gather strength. Spaghetti models currently place a large portion of the United States' petrochemical and resin production plants along the projected path.
According to Resintel supply and demand data, there are a total of 37 Polyethylene Polypropylene plants, with a total annual capacity of more than 65 billion pounds, residing along the Gulf Coast from Corpus Christi TX to New Orleans, LA. Resin producers with reactors in the storm's projected path include: Dow Chemical, Exxon Mobil, Chevron Phillips, Lyondell Basel, Sasol, Formosa, Braskem, Ineos, Invista, and Pinnacle Polymers.
The Texas Division of Emergency Management is preparing for additional state rapid response resources ahead of any weather-related impact. In Houston, electricity provider CenterPoint Energy announced they were monitoring and preparing for severe weather as a way to avoid widespread power outages such as those following Hurricane Beryl this summer, which left the city and around 2 million residents without power for as much as 2 weeks. In addition to power outages, heavy rain and storm surges also create problems for truck and rail distribution networks causing delayed deliveries.
Resin production has largely recovered from Hurricane Beryl, which hit the Houston area two months ago causing isolated resin production outages, some of which were due to precautionary shutdowns ahead of the storm. Still, the impact helped resin producers implement a $.05/lb price increase for July Polyethylene contracts, while Polypropylene prices increased $.09/lb from June-August. Francine has the potential to wreak additional havoc on petrochemical and resin production, and there are another $.10/lb of Polyethylene increases currently on the table.
With two more storms already developing out in the Atlantic, we are reminded that there are still two more months of the 2024 Hurricane Season, so participants are encouraged to maintain a healthy inventory buffer on hand. Stay tuned.
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