Metallurgy / Chemicals / Rubber & Plastics

Category 4 hurricane "Ada" made landfall near the Port of Fulchong, Louisiana at noon on August 29, local time. The roofs of some buildings in the port were lifted off. According to real-time data from the power monitoring website, "Ada" has caused 450,000 households and businesses in Louisiana to lose power. According to the U.S. Geological Survey, "Ada" caused the Mississippi River, which flows from north to south into the Gulf of Mexico, to reverse flow in an "extremely rare" state near New Orleans.

These torrential rains and storm surges have had a significant impact on the energy supply of the United States. According to data from the U.S. Energy Information Administration (EIA), more than 45% of the U.S. refining capacity is located on the Gulf Coast. Offshore oil wells in the Gulf of Mexico account for 17% of U.S. crude oil production and 5% of natural gas production. As of the afternoon of the 28th, some offshore oil producers in the United States have closed oil wells with a daily output of approximately 1.65 million barrels, accounting for approximately 91% of the oil production in the Gulf of Mexico. Approximately 85% of natural gas production in the Gulf of Mexico has also ceased. In addition, floods and power outages in the area may also affect the main pipeline that carries gasoline to the east coast. Colonial Pipeline, the operator of the fuel distribution system, said its company closed two fuel pipelines between Houston, Texas and Greensboro, North Carolina. Nearly half of gasoline and diesel consumption is one of the most important energy infrastructure in the United States. In addition, 288 oil and gas production platforms such as BP, Chevron, ExxonMobil, Equinor, BHP Billiton and Murphy Oil were closed and staff evacuated.

In addition to the greater impact of crude oil and natural gas, as a very important role in the industrial chain, ethylene and propylene have been shut down frequently, and the downstream affected are mainly PVC, PE, PP, VCM, dichloroethane, etc.

In terms of olefins: The companies currently closing their installations include: Westlake Chemical, ExxonMobil and Formosa Plastics' installations in Baton Rouge, as well as the southern part of the state capital of Louisiana, the Mississippi River Dow Chemical, Shintech, NOVA Chemical Shell, Olin and OxyChem along the coast. The shutdown of an ethylene plant with an annual capacity of 6.53 million tons, which accounts for 16% of the total US ethylene capacity of 40.5 million tons/year. The propylene shutdown plant involves a production capacity of approximately 5 million tons/year, accounting for approximately 21% of the total US propylene production capacity of 24 million tons/year.

PVC: The PVC and vinyl chloride installations that were shut down by the hurricane mainly included Formosa Plastics (513,000 tons of PVC and 650,000 tons of VCM), West Lake Chemical (860,000 tons of PVC and 720,000 tons of VCM), and Shin-Etsu America (600,000 tons of PVC). Tons of PVC and 1.77 million tons of VCM), PVC plants totaled about 1.973 million tons per year, and vinyl chloride plants totaled about 3.14 million tons per year. As the United States is a major exporter of PVC, the closure of this installation is bound to have an impact on the global supply side.

Polyolefins: The currently shut down devices include: ExxonMobil's 400,000 tons/year HDPE, 400,000 tons/year LDPE, 900,000 tons/year LLDPE devices, and 410,000 tons/year PP devices at the Baton Rouge petrochemical plant; Dow is located in Plaquemine The 750,000 tons/year HDPE device, 184,000 tons/year and 350,000 tons/year LDPE device, 544,000 tons/year LLDPE device of the petrochemical plant; and the 750,000 tons/year HDPE and 800,000 tons/year of the Taft Petrochemical Plant Years of LLDPE installation. There are more PE devices affected, and the impact of PP devices is relatively small. In addition, Middle Eastern producers have delayed the arrival of some resources to Hong Kong due to maintenance and shipping and logistics obstacles. The recent peak season of downstream demand is approaching and the continued tightness of import resources has caused the new quotations of import suppliers to maintain a strong upward trend.

Affected by Hurricane Ada, oil producers may close their refineries for 4 to 6 weeks or even longer. At present, the hurricane has reduced the supply of oil and natural gas, and prices will continue to rise. Downstream products, polyolefins and PVC, will also be affected. From the perspective of PVC, although the United States is an important source of imports for China, due to the high localization rate of PVC, the impact on the country will not be large, but due to its PVC production capacity Suspension accounts for a larger proportion of the country's total production capacity, and local PVC in the United States will be obviously tense, which will attract resources from other countries, and peripheral prices will rise. In terms of PE, the volume of LDPE and HDPE imported from the United States in 2020 ranked sixth, and LLDPE ranked fourth. In addition, there are more devices shut down, which will have an impact on exports. The sailing time is about 60 days. Goods normally dispatched before the hurricane will arrive at the port in late October. It is expected to mainly affect resources from November to December. In terms of PP, because the import of resources from the United States is very small, it has little impact on China's resources. However, due to the short-term impact of the event, higher external prices are more favorable for exports.