Resin Pricing and Hurricane Harvey in Houston

The spot resin markets were generally slow this past week, then the market began to pick up as Hurricane Harvey began to form and threaten the heart of the Houston area Petrochemical industry. A small flurry of activity ensued as buyers, fearing disruptions, sought to secure additional material as an inventory buffer. All commodity grades of Polyethylene and Polypropylene rose $.005/lb, and as the week drew to a close, resin suppliers were pulling offers off the table pending the storm situation.

Ahead of Harvey’s landfall, Petrochemical complexes began to take precautionary matters by shutting down numerous facilities including crackers, refineries, resin reactors, as well as logistics related shipping channels, ports, warehouses, railways and roads, which together, will absolutely impact resin supply - the full magnitude of which cannot be determined as the storm system remains active.

Harvey hit the Houston area Friday night as a huge Category 4 Hurricane, dumping rain that is estimated to reach a maximum of 50 inches in certain areas. The impact has already proven to be devastating to the population as well as the Petrochemical industry, much of the area is currently flooded. A series of Force Majeure notices have since been issued by resin producers, citing plant shutdowns and logistics constraints.

According to the Petrochem wire, which as of this writing, has thoroughly covered the storm with at least 19 updates, more than 50% of all Texas Ethylene capacity has been taken offline, with at least 130 million lbs of production already lost and an ongoing pace of 70 million lbs lost per day. At least 8 major plastics resin production facilities have also been shut, representing about 900 million lbs of monthly capacity - 30 million lbs of lost resin production per day.