According to foreign media reports, the polar storm in the United States has shut down 90% of the polypropylene production capacity and 67% of the ethylene production capacity in the United States, and other important products have also been severely damaged, resulting in soaring prices in the global chemical market.

Ethylene is a serious setback

"Chemical plants and refineries along the Gulf Coast have been affected by prolonged power outages caused by freezing weather, ice and snow, and disruption of raw material supply and logistics networks." Will Beacham of ICIS chemical added.

Statistics from ICIS show that more than 60 factories have been shut down due to the storm, and most petrochemical enterprises in the Gulf of Mexico have been seriously affected.
In terms of production, ethylene is the most seriously affected, with a capacity of 26 million tons, accounting for 67% of the US total. About 11 million tons (50%) of propylene production capacity is also in a state of shutdown, and many refineries in the region have also reduced production. Us refining production of more than 2 million barrels per day also stagnated.
In percentage terms, the most severely affected major commodities are epichlorohydrin (ECH) (100% U.S. production capacity discontinued), similar to propylene oxide (PO) (100%), toluene diisocyanate (TDI) (100%), ethylene glycol (eg) (90%), polypropylene (PP) (90%), propylene glycol (88%), acrylonitrile (ACN) (73%) and styrene butadiene rubber (SBR) (71%) .
Power outages have strained the global market, which is already facing material shortages and rising prices. Global container transport systems, plant outages and healthy downstream demand have led to tight supply, especially downstream of the propylene and polyethylene (PE) chain.
Propylene and polypropylene may be one of the products most affected by the storm, as the market has been in turmoil. The new coronavirus has reduced demand for transport fuel and has led to the closure or reduction of refineries, especially in Europe and the United States.

The shutdown of these refineries had a knock on effect on the supply of propylene and polypropylene, leading to soaring prices. As the US polypropylene production capacity is highly concentrated along the Gulf Coast, even the temporarily limited production capacity will have a huge impact on the already tight supply market.

Us propylene prices are at a 10-year high, with inventories about half of what they were a year ago. As propylene production decreased last year, consumption exceeded production.

Polypropylene inventories in the United States hit a seven-year low at the end of 2020, partly due to a rebound in demand and partly due to limited monomer supply. As nearly two-thirds of us ethylene production capacity has been suspended, the global polypropylene market may further tighten.

Global market impact

With the Chinese New Year holiday ending on February 17, demand in the world's largest chemical market is picking up. ICIS reported that supply shortages and rising demand after the festival supported China's polyolefin market, leading to soaring futures and spot prices.

China's styrene, monoethylene glycol (MEG), polyester and polypropylene futures prices also rose sharply.

Before the festival, as market participants expected strong demand after the festival, domestic petrochemical trading was strong, and prices rose sharply. Soaring oil prices provide additional impetus for this upward trend.

In Africa, PE and PP sellers from various origins have withdrawn their offers due to the expected US export interruption and strong recovery of the post holiday market.

Asia's monoethylene glycol (MEG) price surged 11% on Thursday, the biggest one-day rise on record. There are concerns that US exports of key commodities to Asia, such as ethylene, could be disrupted by storm related blackouts.

European prices were also boosted by the storm. The price of benzene is driven by the rising upstream price and bullish sentiment, and the price of styrene is currently at the highest point since April 2018.