The recent hurricane Harvey was an incredibly destructive Atlantic hurricane leaving 90 casualties and causing economic damage of about $70 billion to $200 billion. The chemical industry in the US, notably Houston, was hit hard by Hurricane Harvey. Firstly, the Hurricane Harvey chemical spill resulted in the leakage of a large amount of pollutants, endangering the life of people and plants nearby. It is estimated that out of the 132 petrochemical sites located along the Houston Ship Channel, including specialty chemical facilities and refineries, at least one-third and up to half are offline.
How will it affect the procurement and supply chain for the chemical industry?
Shortage of Essential Chemicals
The chemical industry will witness a deficit in commodities as ethylene and propylene, the basic building blocks for numerous chemical will be short in supply. The Hurricane Harvey chemical plant explosion has resulted in the loss of production of ethylene of about 50,000 tons per day. Additionally, about 30% of US propylene, benzene, and butadiene capacity was shut down in the face of the storm. Established players such as Chevron Phillips had to shut down operations, whereas DuPont took its olefins complex offline and Lubrizol suspended operations at its facilities in the Houston area.
Effects Across the Supply Chain
The shortage of such chemicals has affected other industries that are a part of the ethylene supply chain. For instance, the shortage of ethylene has forced a majority of the country’s capacity for making polyethylene plastic to shut down. Additionally, Formosa Plastics also announced that due to the lack of inventory, the company would not be able to meet commitments for polypropylene, polyethylene, and PVC.
Falling Demand for Natural Gas
Numerous factories in the chemical industry shutting down had led to the decrease in the demand for natural gas. A majority of the producers use natural gas as a raw material for the production of ethylene. It has been reported that the demand for natural gas fell by more than 5 billion cubic feet a day, which is a significant amount compared to the country’s regular consumption.
For more information on effects of Hurricane Harvey on ethylene supply chain and procurement of other essential chemicals along with its impact on the chemical industry:
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