Market Updates

Petrochemicals and Natural Calamities !

September, 2018

Nature Shaping Petrochemicals Industry Dynamics
When we talk about chemicals and petrochemicals most of the people think about industry impacting nature either via exploiting the natural resources, or via increasing contamination of water, soil, and air from waste produced. The nature has also made some blows to the petrochemical plants impacting production across locations. There have been many natural calamities in the past two years, which have impacted the petrochemical business at different level. Decreasing crude oil prices, increased pressure on decreasing margins, and increasing competitiveness of global players have magnified the impact of global petrochemical industry. Now, any incidence in one corner of any key country impacts the global market disrupting the demand-supply balance. There have been series of force majeure outages in petrochemical plants.
Exposure: Considering the US market as example, we can see the impact of Harvey in the petrochemical business Earlier, when the US was major importer of chemicals and feedstocks, the impact of natural calamities and sub-freezing temperature was limited to domestic market. Now, the shale gas has changed the game and many markets rely on the US exports. LyondellBasell, Arkema, Dow Chemicals, Ineos, Valero Refinery, were among the many organizations which witnessed the impact with hurricane Harvey. These include the companies which are present across the value chains at different stages from refinery to crackers and from intermediate manufacturing plants to engineering polymer producers.
Impact: Some plants suffered the flood damages, while fire and operational issues were seen in few other plants. The means of transport were blocked in the aftermath of hurricane and even the protected plants had to declare force majeure for limited time. The prices of petrochemical stocks fell significantly and while the product prices witness sharp increase owing to supply tightness. Further, increased winter time with sub-freezing temperature resulted in declining operating rates and temporary outages across plants in the gulf coast.

– Ankur Kalra,
Manager – Chemicals & Materials,
Infoholic Research