Will Hurricane Ida set plastic prices on fire?
Hurricane Ida may not turn out to be as catastrophic for the US economy in general and for oil. But it could push plastic prices up at a critical time of the year. Facts, numbers, comments and scenarios
Last Sunday, Hurricane Ida arrived in Louisiana – in the southeastern United States, on the Gulf coast – with rain and strong gusts of wind that damaged the electricity grid and left a million people without energy, even in the neighboring state. of Mississippi.
THE DAMAGES OF HURRICANE IDA
But analysts, whose assessments were reported by the Associated Press , think that Ida – downgraded to a tropical storm along its path – will not have too severe an impact on the American economy as a whole, and certainly not as dramatic as that of the hurricane. Katrina of sixteen years ago: in addition to the differences in power between the two atmospheric phenomena, also the improvement of the flood defense systems of New Orleans, the most important city in Louisiana, has to do with it.
Financial advisory firm Boenning & Scattergood estimates Hurricane Ida damage to the insurance industry at approximately $ 10 billion, far less than Katrina's more than 90 billion.
MODEST IMPACT, BUT …
In short, the impact on the US economy will be modest, experts say. But only if – they specify – the damage to the electricity infrastructures will be resolved soon and the electricity supplies will be back on in a short time. The Gulf area is a very important petrochemical pole for the United States: Ida has imposed the closure of the plants, but companies – such as ExxonMobil and Phillips 66 – would like to reactivate them soon. To do this, however, they need to have energy.
THE CONSEQUENCES FOR OIL
For the time being, Hurricane Ida has caused a reduction in oil production in the Gulf of Mexico of less than 2 million barrels per day, or about 15 percent of average output. There will be no immediate impact on the availability of gasoline in the country because the reserves are large. Moreover, the driving season – the time of the year when Americans start driving and consume more fuel – is almost over, and in the months of September and October the demand for gasoline is lower: in short, it is difficult to they will experience price spikes.
However, if the refineries remain closed for a long time, or if the buying panic spreads among Americans – as happened after thecyber attack on the Colonial Pipeline – the situation would change.
Initial estimates seem to indicate that refineries on the Gulf Coast did not suffer damage comparable to that of 2017, when flooding from Hurricane Harvey flooded several plants in the Houston area.
THE PRICES OF PLASTIC
However, Hurricane Ida could have a more significant impact on the plastics supply chain, as factories in the Gulf area are already grappling with production bottlenecks linked to both the coronavirus pandemic and the frost storm that hit Texas. in February , sending the electricity grid into crisis.
Plastics prices could rise to "stratospheric" levels, ICIS analyst Jeremy Pafford told Bloomberg . The consequences will not be limited to the United States alone, because the Gulf Coast region is a global hub of the plastics industry: nearly 20 percent of the ethylene available globally – one of the most important raw materials for petrochemicals – is produced here.
As Ida approached Louisiana, contracts for polypropylene, polyethylene and PVC from the Gulf coast were already trading at record levels: the market feared a new crisis after the one in February. The American petrochemical industries have in fact taken a long time to recover from the effects of the Texan cold; worsening the situation is the pandemic, which hinders supply chains and drives up prices, and on the other hand there is the resumption of demand for products and packaging.
Pafford thinks that if Ida were to significantly impact polypropylene supplies for more than three weeks, the prices of the polymer – used to make plastic bottle caps, doormats, or water pipes – could almost rise. by 45 percent, reaching $ 4,000 per ton.
Unlike gasoline, we are in a critical period of the year for the plastics industry: the fourth quarter (October-December) is the “hottest” one for petrochemicals, because the Christmas holidays increase the demand for goods. And therefore of the basic materials necessary for their production.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/prezzi-plastica-uragano-ida-louisiana/ on Wed, 01 Sep 2021 13:13:22 +0000.