Plastics News: Full impact of Harvey on ethylene market uncertain

Posted on September 13th, 2017 by plasticycle

Chicago — Hurricane Harvey, which sucker punched the Houston area, is having a definite impact on the ethylene market.

But it is just a bit too early to tell what will ultimately happen as the region continues to recover, said Chris Gick, manager of industry and market dynamics with polyethylene maker Nova Chemicals Corp.

“It’s really is the early stages of the impact,” Gick said Sept. 12 at Nova Chemical’s Technology Forum held in conjunction with the Plastics Caps & Closures 2017 conference in Chicago. “It’s probably a little bit early to make any conclusions about the final impact of Harvey,”

There were big spikes of ethylene capacity loss following Hurricanes Katrina and Rita in 2005 as well as Hurricane Ike in 2008. And, now, it’s Harvey’s turn.

“Typically what happens is the market goes a bit short, we see a spike the spot ethylene price and it tends to take a period of time,” Gick said. “And I’m being ambiguous here because we’re really not sure what that period is going to be in this case. It takes a period of time for people to restart operations, for all the logistics and all the raw material supplies to return to normal and for the market to get back to some semblance of normality.

“We’re really not sure how long it’s going to take this time. Back in 2005, it took probably to a good six months. Back in 2008, it probably took less time,” he said.

But the 2008 shortages happened in the context of a global financial crisis, including a rapidly declining cost of crude oil, “which tended to give some different context for that event and made it less, really to be honest with you, of an issue,” he said.

“People had already stopped buying to some degree. Demand was actually falling through the floor because of the economic impacts,” Gick continued.

But this is 2017.

“This particular event, it’s not going to look like either of the last two ones. We’re not exactly sure what it’s going to look like because we still need to understand how the restarts are going to work and whether or not there are some assets that won’t restart in a timely fashion,” he said.

“What we know today is many operations are at least attempting to restart,” he said. “There may be a couple of crackers that have extended problems. That’s what we know today,” he told the audience.

“The other aspect of this, of course, is that we were expecting, and still are expecting startups of several new assets,” he said. “This will probably cause a bit of a delay to that.”

Gick said he does not expect any potential delays to last more than a month or two “unless there are some surprises.”

The conference is sponsored by Plastics News.