It is increasingly likely that Hurricane Ida will add another leg of strength to US chemical pricing more broadly, with a host of prolonged production outage news and force majeure notices, giving momentum to some price increase announcements for September, some of which looked very speculative at the time they were made. Buyers will have an eye on continued pockets of supply chain disruption, strong demand in general, particularly for those levered to holiday spending, and the not insignificant fact that we still have almost three months of hurricane season to go! Note that two of the more disruptive storms of 2020 hit in October. We talk specifically about PVC in today's daily - See price chart below.
Source: Bloomberg, C-MACC Analysis, September 2021
In our Sunday Thematic piece, we will expand on some of the drivers of US olefin and polyolefin profitability, including weather-related incidents and trade. Part of the price support in the US today is the difficulty in moving material from outside the US into the market to benefit from the high prices. Weather events have provided several upside “saves” for US sellers over the last year, throwing markets that were beginning to look more balanced back into deficit. The week before Ida we were commenting on some signs of slack in the US polyethylene market as sellers explored the more speculative spot export market for the first time in many months, and ethylene prices have toyed with finding export buyers more than once since January. Ethylene remains a wild-card post-Ida as the impacted region is an importer of ethylene from Texas, and if the shutdowns in Louisiana are balanced – ethylene and derivatives - ethylene could become surplus quite quickly. On the flip side, if ethylene derivatives on the Mississippi startup before the ethylene plants then the opposite will occur. Tactically, if we were an ethylene and derivative producer on the Mississippi, we would start up our derivative plants first and buy a few million pounds of ethylene, as a stronger ethylene market would help some of the derivative price initiatives. Separately, from a mechanical and engineering perspective, it is likely that the derivative facilities will be ready to restart first and easier to restart, assuming any third-party utility and logistic issues can be solved.
