The polar cold that gripped Texas last month forced many chemical factories to shut down due to network disruptions. Disrupting the global supply chain for consumer goods and driving up the prices of critical components for automotive manufacturing.
Cold in Texas: the world’s largest petrochemical complex severely disrupted
Power outages have effectively paralyzed the largest petrochemical complex in the world, factories in the Gulf of Mexico region forced to close were even more numerous than during Hurricane Harvey in 2017.
A month later, many of them have not resumed their activities. Analysts even estimate that it could take several months before the sites are operational again.
Soaring prices for chemical compounds
Prices for polyethylene, polypropylene and other chemical compounds used to make auto parts, computers and a wide range of plastic products have hit their highest level in years in the United States as supplies tighten . Prices for polyvinyl chloride, or PVC, have more than doubled since last summer, according to S&P Global Platts.
As factories slowly restart, it will take months for inventories to recover, with prices likely not returning to normal levels until June, said Joel Morales, analyst at IHS Markit.
As a reminder, polyethylene is a very elastic material, which easily recovers its original shape after a blow. The durability of its appearance is longer than in other plastics and it cuts and shapes easily. Which makes it a widely used component in Heavily worn plastic in the manufacture of bumpers.
Polypropylene is a type of plastic that is very similar in characteristics to polyethylene. On several occasions, it even exceeds its mechanical properties. It is one of the most widely used plastics in the automotive sector in all types of elements and parts.
Increased delays and costs for builders
Such a situation should lead to increased costs and delays for car manufacturers, with impacts felt at the end of the chain by consumers.
In particular, an increase in vehicle prices could result from this. Unless the automotive groups reduce their margins. What is not won when the (the) Covid has a hard impact on their portfolio.
Polymers: 30% of the cost of raw materials of a vehicle
The polymers represent about 20% by weight, and of the order of 30% of the cost of the raw materials necessary for the manufacture of a vehicle. Plastics are used for a variety of applications, from the simplest to the most technical. The most widely used resin is polypropylene, single or supplemented with glass fibers. It represents between 30 and 40% on average of the plastic used in a vehicle. Polypropylene is found in the interior of vehicles, but also in body parts. The second most widely used type of polymer is polyurethane for foams, in particular for the upholstery of seats and dashboards, of the order of 20 to 25%.
Other plastics are used for their technicality. Among them are polyamides, which represent 10 to 15% of the plastic used in a vehicle. They are very popular for equipment under the bonnet and parts subject to stress, such as pedals or door handles. HDPE represents between 4 and 8% of the polymers present in vehicles and is used for fuel tanks, windshield washer tanks in particular. Finally, several plastics are used between 3 and 6%: PET, ABS, PE, polycarbonates, PVC, PMMA, depending on the applications, the choice of styles and the techniques.
Very tight supply balances
Many chemical companies have refused to comment on the current state of their factories. A spokeswoman for Dow Inc – a US chemical company – said it had closed several units in Texas and Louisiana due to the frost.
“We expect these product and supply chain impacts and others like them across the industry to create very tight supply balances in our key value chains,” said the spokesperson.
The consequences of the Texas freeze add to the problems facing a global supply chain that has been severely affected by the Covid-19 pandemic and has struggled to meet demand over the past year.
Most serious shortage of raw materials in decades
An active hurricane season along the US Gulf of Mexico coast last year also disrupted markets. The prices of chemical raw materials were already reaching highs several years before the freezing episode in Texas. Some companies have even said that the result is the most severe shortage of petrochemicals they have seen in decades.
Unmatched price increase for polypropylene and polyethylene in 10 years
According to Mike Mallon, sales manager at American Packaging Corp., the rise in prices for polypropylene and polyethylene is the strongest and fastest in at least a decade.
According to him, the prices may not decline until the fourth quarter, leading to higher prices for consumers.
Jason Keiswetter, president of Petoskey Plastics, which manufactures car seat covers, among other things, said its raw material costs were up nearly 150% from last summer, after suppliers previously announced increases. price before the frozen Texas episode. “My family has worked in this industry for 50 years,” he said. “We have never seen a commodity price spike like this. “
More than 60% of America’s PVC is still missing almost a month after the freezing storm that hit Texas and Louisiana and decimated the power grid, according to ICIS. Export prices to the United States have nearly doubled to a record high of $ 1,625 per tonne in the past year.
Honda and Toyota already impacted
These shortages are pushing up the costs of a storm that wiped out a third of Texas natural gas production and forced some chipmakers to cut production, exacerbating an already existing shortage of semiconductors.
Honda has already indicated on Wednesday that it will halt production at most of its US and Canadian auto plants next week, citing supply chain issues, including fallout from winter storms in the United States.
Toyota said it was recently informed that a shortage of petrochemicals will affect production at its auto plants.
USA: one of the largest exporters of plastics and other petrochemicals
The US Gulf of Mexico coast has seen an explosion of petrochemical plants over the past two decades, after the boom in hydraulic fracturing allowed new amounts of domestic natural gas and other fuel byproducts to be produced. fossils that could be converted into chemicals and plastics.
The boom has helped make the United States one of the largest exporters of plastics and other petrochemicals in recent years. But the winter storm highlighted the main vulnerabilities of dozens of chemical factories stretching from Corpus Christi, Texas, to New Orleans.
As the storm halted power generation, petrochemical plants were told to shut off power as Texas regulators attempted to preserve the remaining load on the grid. Factories that had their own on-site power generation struggled to get natural gas to power it, as wells froze and gas production in Texas plummeted.
A quick and unplanned shutdown of some of the country’s largest manufacturing plants occurred over a period of several hours. At the height of the forced shutdowns, 75% of the polyethylene capacity was closed, 62% of the polypropylene capacity and 57% PVC, according to S&P Global Platts.
Our opinion, by leblogauto.com
With the drought in Taiwan, the polar cold in Texas, and even the Covid, Mother Nature seems to tell us that Man was wrong to ignore it too much … climate change is already having economic and industrial consequences and it’s only just beginning …
The US Chemical Safety and Hazard Investigation Board has called on chemical companies to better prepare for the increasing likelihood of extreme weather events following Hurricane Harvey.
“Companies exposed to disasters in the Gulf of Mexico must reassess their risks after two crippling storms within five years,” said Rich Sorkin, chief executive of Jupiter Intelligence, which analyzes potential risks from climate change for chemical companies and others.
Sources: Bloomberg, WSJ, CETI
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