Flooding knocked out more than 20% of US refining capacity, according to S&P Global Platts. That means less oil can be turned into gasoline and jet fuel, which will cause headaches at the pump in the coming days and weeks. Vertical Research estimates that Harvey will impact 46% of US ethylene capacity and 36% of polyethylene capacity. According to the American Chemistry Council, with $129 billion in shipments, Texas is the largest chemical producing state and Louisiana (with $51 billion in shipments) is the fourth largest chemical producing state. Within those states, the areas directly affected by Harvey account for $155 billion in shipments (around one-fifth of total chemical industry shipments in the US).
“Hurricane Harvey is a record breaking storm with unprecedented impacts on the people and property along U.S. Gulf Coast due to extreme flooding. According to the Federal Emergency Management Administration, the storm is responsible for the worst flooding in United States history," said Cal Dooley, president and CEO of the American Chemistry Council. "The chemical industry is deeply integrated into the economies and communities of Texas and Louisiana, particularly in the areas that have been hardest hit by the storm. Our first priority is supporting industry employees and their families and helping to ensure their safety and that of the areas surrounding our plants. The industry employs almost 79,000 Texans and more than 25,000 Louisianans, many of them living in areas that are experiencing devastating flooding. It’s likely that thousands of them will have significant damage to, or even the complete loss of their homes, cars, and basic possessions, as have countless families in the region."
According to Dooley, ACC member companies have comprehensive and well-rehearsed emergency plans that are activated in close coordination with local, state, and national authorities; other businesses; and distribution networks in the path of storms. He noted that compliance with Responsible Care, the industry’s global environment, health, safety and security program that includes third party audits and certification, is mandatory for all ACC members.
“Chemical facilities are designed and built with major storms in mind," added Dooley. "Specific construction elements can include reinforced manufacturing equipment that helps improve the overall structural integrity of a facility in accordance with industrial building standards for hurricanes. Dikes and levees are incorporated to reduce the risk of chemical releases."
Yesterday, a series of explosions took place at Arkema Inc.'s facility in Crosby, TX, 25 miles northeast of Houston. The plant manufactures organic peroxides, chemical compounds used in manufacturing pharmaceucial and construction materials, which can ignite when not stored at a low temperature. Plant crews worked on restoring the power and containing the chemicals, but on Wednesday, the site, as well as a 1.5-mile radius around it, was evacuated in fear of an imminent explosion.
Arkema said it is working closely with public officials to manage the implications of this situation, and have communicated with the public the potential for product to explode and cause an intense fire. Arkema noted that organic peroxides are extremely flammable and, as agreed with public officials, the best course of action is to let the fire burn itself out.
Bob Mitchell, president of the Bay Area Houston Economic Council, told CNBC that specialty chemicals are most impacted by Harvey.
“Everything from plastics to the coatings on your plastics, all the resin products,” he explained. ”You can’t get the people back and forth to work, it’s a human factor. People are flooded. It’s a matter of getting employees to work.”
Mitchell noted that in today’s just-in-time manufacturing environment, even once suppliers get back online, manufacturing companies will be left waiting.
To remedy the situation in the future, he urged officials to build a coastal spine to protect Houston. He noted that such a system was built in The Netherlands, where 80% of GDP is derived from regions that are below sea level. Closer to home, Mitchell said that following Hurricane Katrina, New Orleans spent $15 billion to build a dyke around Lake Ponchartrain.
“We can build a coastal spine for $11 billion,” he insisted. “I am concerned about protecting this region. We will be shut down for weeks, but it could have been months if Harvey had been a direct hit.”
And yet, for manufacturers of household and personal products, the impact of Harvey on operations may not match the size of the storm itself. According to sources, there has been no catastrophic news about Harvey-impacting our industry.
Yesterday, Lonza issued a statement that is assessing the changing situation in Houston, TX (USA) following Hurricane Harvey. “Most importantly, all of our employees are safe; and after our initial assessment, it appears our facilities have not suffered any noticeable damage,” according to Lonza. “Key personnel are currently able to travel to all sites to assess the situation and maintain essential facility operations. We expect the site to be fully operational again in the coming days.
Also in a statement, BASF said it is assessing the impact of Tropical Storm Harvey and is taking the necessary steps to help affected employees and local communities, and safeguard its operations. As a precautionary measure, the Houston office in Energy Tower IV and smaller sites in Texas (including Beaumont, Bishop and Pasadena) have been shut down. But operations at our larger Texas sites in Port Arthur and Freeport continue. BASF’s Geismar, Louisiana, site is currently not impacted.
BASF is assessing impacts to site infrastructure and local transportation issues that might affect receipt of raw materials and distribution of finished products. Given the severe flooding, inbound and outbound logistics are expected to be challenging for our sites in Texas. BASF is directly informing its customers about the availability of products.
“With respect to impact on operations, it is too soon to tell. Due to local transportation issues and the challenges to inbound and outbound logistics, BASF has declared Force Majeure on a number of products,” explained a company spokesperson. “The company is communicating directly with customers regarding product availabilities.”
While the industry assesses the damage caused by Harvey, several chemical suppliers are releasing reports about storm-related damage.
ExxonMobil acknowledged Tuesday that Hurricane Harvey damaged two of its refineries, causing the release of hazardous pollutants. In a filing with the Texas Commission on Environmental Quality, ExxonMobil said that a floating roof covering a tank at the company’s Baytown oil refinery sank in heavy rains, dipping below the surface of oil or other material stored there and causing unusually high emissions, especially of volatile organic compounds, a category of regulated chemicals.
"This is an unprecedented storm, and we have taken every effort to minimize emissions and safely shut down equipment," said Exxon spokeswoman Charlotte Huffaker.
Meanwhile, Shell told state regulators this week that a floating roof over a tank at its oil refinery in Deer Park, TX, partially sank during the heavy rainfall. The company said 100 pounds of benzene and 100 pounds of toluene were released.
Early Wednesday, Motiva started closing its Port Arthur refinery "in response to increasing local flood conditions." The plant, the largest US oil refinery, won't open until flood waters recede, according to company executives.
In other Harvey-related news, The Dow Chemical Company and The Dow Chemical Company Foundation announced this week the allocation of $1 million to support immediate relief and long-term recovery and rebuilding efforts associated with the storm and its aftermath as well as support for the Company’s impacted employees.
“Our thoughts and prayers are with the entire region, including our employees and the communities that we call home as the wrath of Hurricane Harvey is endured,” said Andrew Liveris, Dow’s chairman and chief executive officer. “Our primary concern right now is the safety of our employees and communities, and we’re working closely with our Dow families and local partners to help.”
As a part of this commitment, Dow is collaborating with national and local partners providing critical services to individuals immediately effected by the flood. To help meet this immediate need, Dow will donate $100,000 to the American Red Cross Disaster Relief Fund, $100,000 to Team Rubicon, and $200,000 to other local nonprofit organizations assisting the region.
Dow is also matching employee and retiree donations up to $100,000 to the American Red Cross Disaster Relief Fund. Texas is home to about 12,000 Dow employees and contractors.