Gustav Spares Chemical Industry of Major Damage but Leaves a Wide Path of Plant Disruptions

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Researched by Industrial Info Resources (Sugar Land, Texas)--Hurricane Gustav moved slowly through the tropics but sped quickly across the Gulf of Mexico, ultimately making landfall in a fragile portion of Louisiana. The storm has left thousands of people and dozens of chemical plants with no power due to high winds, although, fortunately, flood waters seem to be minimal. An estimated 100 plants operating in the Chemical Processing Industry (CPI) were in the path of Hurricane Gustav, threatening billions in installed assets vital to the Gulf Coast's industrial food chain. Power remains unavailable to many while other plants fortunate enough to recover all or portions of their power don't have the available man power to restart operations -- and likely won't for a couple more days.

The operations for at least 15 ethylene units along the Louisiana and eastern Texas coastline were interrupted in the wake of the storm with nearly half of those units close enough to the storm's path to be without power for an extended period of time. Several of the major ethylene producers in this area, such as The Dow Chemical Company (NYSE:DOW) (Midland, Michigan), had only limited power late Tuesday, making it impossible to begin the restart process. Dow's Plaquemine, Louisiana, site operates 38 furnaces between two ethylene units, and it could take a week or more to get them running again after all power has been restored. Dow operates another ethylene plant in Taft, Louisiana, with 20 furnaces that has been offline since the weekend. The process of getting steam production back under way was starting on Tuesday, and operations could be resumed by this weekend if the restart process progresses without problems.

Precautionary plant shutdowns in Port Arthur and Beaumont, Texas, and in Lake Charles, Louisiana, as well as surrounding areas, affected 50 or more other chemical plants, with six of those being ethylene units. Calls to plants in these areas revealed that most plant owners partially restarted operations on Tuesday and that most are expected to be back in full operation by the end of this week. Most plants in the region were operating on skeleton crews Tuesday as evacuees make their way home. On some occasions, these unplanned shutdowns can turn into prolonged outages as plant owners take advantage of the plant being offline to make opportunistic repairs, although very little of this has been identified so far and most plants are expected to resume normal operations immediately.

Considering the size and speed of Hurricane Gustav, the largest loss to the chemical industry in the region so far appears to be the lack of power. The industry might have been spared major asset damage that could lead to a catastrophe for long term deliveries and chemical pricing. The effects on downstream chemical commodities, such as plastics, resins and polymers, could be something that is not seen or noticed in pricing for weeks or months to come, depending on how well inventories satisfy short-term market demands.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.