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Hurricane Information & Chlor Alkali Market Update

8/27/2017

For all the latest Hurricane information and market updates, please refer to our web site at www.owichloralkali.com.  The "Atlas" will show a live view of affected area.  Hit the "calculator icon" to get updated volume totals of the plants affected.  The “ Prospectus" will outline concerns and market updates.  Please check back often for ongoing updates.

Storm Predictions from World Port -   Meteorologyon 

Hurricane Harvey was a Category 4 hurricane as it approached the Texas coastline, with landfall occurring at 10:30 pm on Friday, with the storm moving at approximately 5 MPH.  This will create a large storm surge near and just north of landfall, on the order of 6-12 feet along with winds over 100 knots.  The worst storm surge and wind damage will be from Corpus Christie to Port O’Connor, TX. The storm is expected to go inland approximately 20 miles and stay as a Category 1 hurricane.  There are numerous reports of tornados from Corpus Christi to Houston. 

With the potential of the storm sitting over southeast Texas for 3-5 days, rainfall amounts of 10-25 inches are possible for some locations in southeast Texas, leading to significant flooding.  The highest risk of flooding encompasses an area from Houston to Corpus Christie to just southeast of San Antonio to southeast of Austin, centered on Victoria, TX.

Hurricane effects on Chlor Alkali Market:

5,622M s/t of Chlorine capacity are in the storm affected areas in Texas. This equates to 36% of domestic production, involving C/a plants in Ingleside, LaPorte, Freeport, Baytown and Point Comfort. This large percentage of total output should be of major concern to the consumer as logistical delays will inevitable. 

The last hurricane to hit the Texas area occurred in September of 2008, and was followed by a second hurricane hitting a few weeks later.  At that time, industry rates fell below 65% or less than 25,000 tons per day.  Compared this to rates in the month prior, August 2008, when rates were 90% or estimated 34,000 tons per day.

Fast forward 9 years and we see a similar scenario playing out.  Chlor Alkali operating rates in July were 95%, which produced an average daily output of 38,342 tons of Caustic soda.  It is a safe bet we will see September operating rates well below the rates of June, July and August.  Through July, the C/a industry has produced 73,000 DST more than through the same period in 2016.  However, exports in June exceeded 392,000 DST, making it the 2nd largest month in history and challenging producers’ attempts to replenish inventories.  The sharp reduction in production as a result of this storm will have ripple effects through the end of this year.    

The impending flooding, due to massive tide surges and rain fall, will cause major delays in rail traffic, both inbound (empties) as well as outbound (full) deliveries.  The Chlor Alkali plants themselves which have been taken off line, not only have to wait for power to be restored but as in the past hurricane events, must wait for employees to come back to work.  Many are taking care of families and personal loss from damage due to the storm. Most, have taken their families out of the storm center prior to the hurricane landing and must wait for the “all clear” before returning.  In the past, similar events caused delays up to 30 days before people could safely return to work.  This makes "on time" deliveries by barge and or rail virtually impossible in the short term.  Rivers will be too high to ship and rail roads may have to inspect tracks that has been underwater prior to releasing backed up traffic.  Most plants do keep “skeleton” crews on-site but this only enables producers to run at greatly reduced rates. 

Here are some things you can do to be proactive and ensure you’re doing all you can to improve your logistical options. 

  • Contact your preferred supplier to make sure they have a game plan to deal with long delays. 
  • Does your supplier want you releasing empty rail cars back to the Gulf or do they prefer to have you release these empties to an alternative fill site as in East Coast ship tanks or other inland production sites?
  • If delays are more severe than expected, is there enough import supply to pick up the slack?  Asian imports are at an all-time low.  In the past, hurricanes covered a much broader swath and not just production sites but customers manufacturing sites as well.  In this particular case, it seems this hurricane was isolated to a relatively narrow geography, meaning many plants outside the perimeter of the hurricane can continue to operate, putting demand pressure on unaffected plants.

As always, the OWI team is here with up to the minute information and the infrastructure to ensure OWI’s customers are taken care of.  Please feel free to reach out to myself or any member of our team and we will do all we can to assist you through this challenging time.