2017 Highlights: US Chemical Industry Suffered from Hurricane Harvey

When hurricane Harvey pummelled the US Gulf Coast with record-breaking rain and winds in August 2017, it knocked offline between one-third and half of the more than 130 petrochemical sites and speciality chemical facilities along the Houston Ship Channel. US industrial production suffered substantially from the reduced operations of these plants.

Flooding in Houston from Hurricane Harvey

Most Recovered From the Hurricane except CPChem

Working US capacity for organic chemicals and resins was at about 90% prior to Harvey’s landfall, and by the end of August, less than half was available. Capacity use remained below pre-Harvey levels well into September, but had rebounded to nearly 85% by the end of September as plants resumed operations. Federal Reserve data also paint a rosy picture of recovery for the US chemicals sector, due to minimal asset damage from Harvey. For example, total US industrial production rose 0.9% in October, and the output of chemical materials jumped 12.3% as factories shuttered by the hurricane returned to regular operations.

Only one ethane cracker in the region remains shut down because of the storm - Chevron Phillips Chemical’s (CPChem) 835,000 million tonne-per-year cracker at the Cedar Bayou complex. It’s been shuttered since 26 August, just hours after Harvey came ashore. “In general, there have been workarounds or repairs for all the damage that has been done by Harvey, other than at CPChem Cedar Bayou, because of the fact that there was high water damage,” says Steve Lewandowski, vice president of olefins for IHS Markit. “They had eight feet of water in some parts of the plant.” Beyond crackers, CPChem also has two alpha olefins units in Cedar Bayou that remain offline, Lewandowski adds. He says all of the other assets that were running pre-Harvey are now back onstream.

US Chemical Industry May Suffer Longer

The disruption caused by hurricane season might not be over. Chemical product supply chains that were already constricted - for propylene, polyethylene and caustic soda, for example - will likely see additional tightness that could last into the first quarter of 2018 or longer. “It is just compounding an already tight situation,” Lewandowski explains. “Demand continues to be good and prices are poised to move up.”

Safety Lesson Learnt from the Hurricane

In addition to the economic impact of hurricane Harvey, there is also potential regulatory fallout. The US Chemical Safety Board (CSB) is in the middle of investigating the explosions that took place in at an Arkema chemical plant in Crosby, Texas after massive flooding from the storm caused the facility to lose critical refrigeration of organic peroxides. The CSB is not expecting to issue its report until June, but the agency has already urged companies to revisit their emergency preparedness, hazard and risk assessments, given the expectation that climate change will cause more frequent and intense extreme weather events that could impact their operations.

Arkema Disaster

Companies that are ill-prepared could experience legal repercussions. Arkema now faces multiple lawsuits arising from the incident at its Crosby facility. A suit from the local Harris County government seeks to recover its costs for responding to the week-long incident and hold the company legally responsible for violating state environmental laws. Separately, residents from around Arkema’s Crosby facility have joined in a class action lawsuit against the company. They claim numerous toxic substances have been found in soil, surface water and ash samples in the area, resulting from the incident.