Petrochem prices to spike

27-Sep-05

Power problems caused by Hurricane Rita have affected 1.5 million customers in Texas and Louisiana, home to half of the U.S. chemical production. This has disrupted 50% of US chemical production. 150 refineries and petrochemical plants were shut down across the Gulf Coast region, with an estimate 72% of all U.S. production capacity for ethylene. Earlier, Katrina shut or cut production at plants responsible for 20% of the nation's ethylene capacity. The Gulf Coast region's plants also produce 57% of USA's styrene, 46% of chlorine, 94% of vinyl acetate monomer, and 67% of the of polyethylene. A spike in petrochemical prices is expected in the next quarter. Polyethylene, polypropylene, polystyrene and polyvinyl chloride have already met with price increase announcements. Dow Chemical, DuPont and ExxonMobil are among those who shut operations even before Rita swept across the Gulf of Mexico, and will continue to remain closed this week. Last week, Dow Chemical and DuPont called energy prices (especially natural gas costs) a "severe threat" to the chemical business, and they would soon seek price increases for all their products. Strong polymer demand pushed prices up by as much as 15% this month, as supply continues to dwindle. Processors scramble to replenish stockpiles amid concerns about low availability and further sharp price increases in the pipeline. Polyethylene registered one of the biggest monthly gains in recent years with LLDPE rising by more than 15% and HDPE by around 14%. Polypropylene and PVC prices both rose by 10%, while polystyrene was up by 7%.