Hurricanes: Their Impact on Refinery Margins & Polymer Prices

Transcription

1 Hurricanes: Their Impact on Refinery Margins & Polymer Prices Prepared by:

2 Hurricanes cause massive damage to the US economy The cost of Harvey s destruction, mostly in southeast parts of Texas, has been pegged as high as $190 billion, with Irma s damages estimated as high as $100 billion. The biggest hit are the refiners. Texas accounts for about 70 percent of U.S. production of ethylene, one of the most important chemicals used to make plastics. Refinery comeback efforts have been disrupted by flooding, damage, power outages and challenges created by the sudden nature of some shutdowns. Current status of crackers: Around 60 percent of US ethylene capacity was hit by Hurricane Harvey. Current estimates indicates that about 54% (16.2 mmt/year) of the total US ethylene capacity is still off the market. Current operational status of plants in the southeast US: Back to back hurricanes have almost submerged the southeast coast of the US mainly Texas and Florida and have dealt a serious blow to America's energy infrastructure, knocking oil rigs offline, disrupting shale oil drilling inland and closing key ports. Company Location Capacity Status Ethylene LyondellBasell Corpus Christi, Texas 770,000 mt/year operating Markwest Energy Partners LP Corpus Christi, Texas 80,000 mt/year operating Occidental Chemical / Mexichem Ingleside, Texas 545,000 mt/year Shutdown Formosa Plastics Corp, Point Comfort, Texas 815,000 mt/year operating Chevron Phillips Chemical Co Sweeny, Texas 995,000 mt/year reduced run rates Dow Chemical Co Freeport, Texas 1.04 million mt/year operating Dow Chemical Co Freeport, Texas 1.5 million mt/year operating Shell Chemical Co Deer park, Texas 435,000 mt/year operating Ineos Olefins & Polymers USA Chocolate Bayou, Texas 1.02 million/year operating LyondellBasell Channelview, Texas 870,000 mt/year Shutdown 1 P a g e

3 LyondellBasell LaPorte, Texas 1.15 million mt/year Shutdown ExxonMobil Chemical Co Baytown, Texas 1.2 million mt/year operating Chevron Phillips Chemical Co Cedar bayou, Texas 800,000 mt/year Shutdown ExxonMobil Chemical Co Beaumont, Texas 900,000 mt/year operating Huntsman Corp Port Neches, Texas 250,000 mt/year operating BASF Fina Petrochemicals LP Port Arthur, Texas 1.04 million mt/year operating Dupont De Nemours Co Orange, Texas 680,000 mt/year operating Company Location Capacity Status Propylene Alon USA Big Spring, Texas 35,000 mt/year operating LyondellBasell Corpus Christi, Texas 285,000 mt/year Shutdown Eastman Chemicals Co Longview, Texas 320,000 mt/year operating Formosa Plastics Corp, Point Comfort, Texas 270,000 mt/year operating Chevron Phillips Chemical Co (CP Chem) Sweeny, Texas 545,000 mt/year reduced run rates Dow Chemical Co Freeport, Texas 750,000 mt/year process upset Ineos Olefins & Polymers USA Chocolate Bayou, Texas 400,000 mt/year operating Valero Energy Corp Texas city, Texas 110,000 mt/year operating Marathon Petroleum Corp Texas city, Texas 70,000 mt/year operating Valero Energy Corp Houston, Texas 135,000 mt/year operating Shell Chemical Co Deer park, Texas 500,000 mt/year operating ExxonMobil Chemical Co Baytown, Texas 1.00 million mt/year operating Chevron Phillips Chemical Co (CP Chem) Cedar bayou, Texas 455,000 mt/year Shutdown Enterprise Products Partner/Total Mont Belvieu, Texas 1.9 million mt/year operating BASF Fina Petrochemicals LP Port Arthur, Texas 860,000 mt/year operating Total Petrocemicals USA Inc Port Arthur, Texas 120,000 mt/year Shutdown Huntsman Corp Port Neches, Texas 180,000 mt/year operating Dupont De Nemours Co Orange, Texas 50,000 mt/year operating 2 P a g e

4 Company Location Capacity Status HDPE LyondellBasell Victoria, Texas 260,000 mt/year Shutdown Formosa Plastics Corp, Point Comfort, Texas 650,000 mt/year operating LyondellBasell Matagorda, Texas 785,000 mt/year Force majeure LyondellBasell Chocolate Bayou, Texas 220,000 mt/year Force majeure Chevron Phillips Chemical Co (CP Chem) Pasadena, Texas 985,000 mt/year Shutdown Chevron Phillips Chemical Co (CP Chem) Cedar bayou, Texas 270,000 mt/year Shutdown LLDPE Dow Chemical Co Seadrift, Texas 590,000 mt/year operating Formosa Plastics Corp, Point Comfort, Texas 365,000 mt/year operating LyondellBasell LaPorte, Texas 355,000 mt/year Force majeure Chevron Phillips Chemical Co (CP Chem) Cedar bayou, Texas 190,000 mt/year Shutdown LDPE Dow Chemical Co Seadrift, Texas 225,000 mt/year operating LyondellBasell LaPorte, Texas 200,000 mt/year Force majeure Chevron Phillips Chemical Co (CP Chem) Cedar bayou, Texas 280,000 mt/year Shutdown PP Braskem SA Seadrift, Texas 225,000 mt/year operating Formosa Plastics Corp, Point Comfort, Texas 430,000 mt/year operating Inoes Olefins & Polymers USA Chocolate Bayou, Texas 440,000 mt/year Force majeure Inoes Olefins & Polymers USA LaPorte, Texas 145,000 mt/year Force majeure ExxonMobil Chemical Co Baytown, Texas 725,500 mt/year operating PVC Formosa Plastics Corp, Point Comfort, Texas 625,000 mt/year operating 3 P a g e

5 Impact of Harvey on Gross Refining Margin: In the US, margins rose amid expectations for a product supply shortfall in the wake of Hurricane Harvey, coupled with already firm domestic demand, which supported product crack spreads. In Europe and Asia, product markets were supported by supply outages in the US, which encouraged higher arbitrage volumes, as well as healthy seasonal demand, which helped lift refinery margins. Refiners across Asia have ramped up output to ship products to the US, and to markets that are usually supplied by US refineries. Meanwhile, gross refining margin in Asia remains elevated. Singapore GRM is at 9.3 USD/ bbl, up 27 percent from the July levels. Impact of Harvey on polymer prices in Asia: Most refiners' margins would get a boost because the price of the fuel they sell will be higher while the cost of the crude oil they buy to run through their plants remains low. That combination has increased profit margins for some fuel makers on the East Coast and in the Midwest by more than a third. The impact of Hurricane Harvey's damage continued to reverberate throughout Asia's petrochemical markets in last few weeks. Hurricane Harvey has changed the pricing dynamics for current month and prices are expected to remain elevated till the US oil downstream industry is back to pre-harvey stage. Major commodity polymers like LDPE, HDPE, LLDPE and PP prices have continued their upward journey in Asia in the last couple of weeks in anticipation of tight product availability from the US given the many unplanned plant shutdowns following Hurricane Harvey. Because of the many force majeures declared post the hurricane, there is a disruption in availability. This has kept the market undertone bullish in the last couple of weeks. 4 P a g e

6 Polymer Price Trends (CFR South East Asia basis) between August 23, 2017 to September 13, 2017: Source: Polymerupdate Data Analytics Cell As seen above, HDPE Film prices rose by 3.39%, LDPE Film prices climbed by 3.25% over the last three weeks. Post Harvey, LLDPE Film prices witnessed a sharp rise of 5.17%, while PP Injection prices increased 3.53% during the same time period. Impact on Chlor-Alkali sector: Producers such as Exxon Mobil Corp. and Occidental Chemical Corp. have shut plants following landfall of Hurricane Harvey and have cut back operations along the flood-crippled Gulf Coast. Those disruptions had affected 37 percent of U.S. capacity for making chlorine and caustic soda, salt-derived chemicals used to make vinyl and PVC pipe. Occidental Chemical and Formosa Plastics Corp. are among the chlor-alkali producers that shut plants because of Hurricane Harvey. Westlake Chemical Co. stands to benefit the most from tighter markets for chlor-alkali and ethylene as well as downstream products such as polyethylene and PVC resins. While its rivals were shutting plants, Westlake s facilities were outside the direct path of the storm and so it was operating at normal rates. Some of Indian producers like DCW Ltd has gained the most as it is not only a key manufacturer for PVC but also for caustic soda which is also one of the chemicals most impacted by the hurricane. 5 P a g e

7 Stock performance of DCW Ltd (post-harvey): Source: Moneycontrol Impact of Hurricane Irma: As petrochemical plants in southeast Texas and other areas affected by hurricane Harvey move to restart operations, there are concerns about chemical fallout from its successor, hurricane Irma, which battered much of Florida. As per Environmental groups, hurricane Irma presents hazards because of the presence of large number of potential sources of toxic pollution across Florida. These include phosphate mines and Superfund sites areas identified by the US Environmental Protection Agency (EPA) as contaminated by hazardous waste posing a risk to human health or the environment. Can Hurricane Maria pose any threat to the US? Despite historic damage, hurricane season isn t close to over yet. First Hurricane Harvey flooded huge swaths of the South and then Irma has left hundreds of thousands of Floridians without power more than a week after it struck the state. Now, even as the impact of Hurricane Jose, which remains well offshore, is being felt in parts of coastal North Carolina, Maria has become the latest powerful storm to be known to many, many Americans. 6 P a g e

8 Though Hurricane Maria is set to follow the path of Hurricane Irma, whether Maria will ever pose a threat to the US will depend on steering currents in the upper atmosphere over the western Atlantic Ocean and the eastern United States that cannot be pinned down more than a week in advance. Hurricane Maria - Category 5 storm made landfall on the island of Dominica. It made landfall in Puerto Rico early Wednesday as a powerful Category 4 storm. Overnight, it pounded St. Croix, one of the U.S. Virgin Islands. The storm weakened by Wednesday evening to a Category 2. As of Thursday night US time, Hurricane Maria was not yet forecasted to make landfall in mainland U.S. Disclaimer The aim of this report is to provide organized information to our readers on Hurricane Harvey s impact on the Chemical and Petrochemical sectors of the US. All information presented in the report is for informational use only. The information provided has been gathered from various sources believed to be providing correct information and we have taken due care and caution in compilation of data for this report. This material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and that it should be relied upon, as such Polymerupdate does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. 7 P a g e

9 Bibliography: P a g e