This past week, Hurricane Laura severely damaged parts of Louisiana where a large amount of PVC resin is produced. Many PVC Pipe mills are supplied from resin producers in this area.
The aftermath is being assessed and PVC manufacturers are disclosing damages and timelines for repairs. This disruption in the supply chain joins other challenges like Covid-related stoppages, that PVC manufacturers have been dealing with the past four months, resulting in four consecutive increases in June, July, August and now September. This trend is set to continue.
Force majuere is when unforeseeable circumstances prevent someone from fulfilling a contract. In this case, Hurricane Laura has caused some PVC manufacturers to declare this due to damage sustained to their facilities and supply chain. The below PVC manufacturers, who supply PVC Pipe mills with raw materials, have declared force majeure:
Westlake Chemical: declared 8/31 due to widespread power outages and damage at its Lake Charles, Louisiana complex. Restart would primarily depend on the availability of electric power, industrial gases, and other feedstocks. Affected – all North American polyvinyl chloride (PVC) and upstream vinyl chloride monomer (VCM). Westlake’s FM will sharply tighten already tight PVC availability.
Formosa Plastics: declared 8/14 at their Texas and Louisiana complexes due to a plant turnaround (plant went offline for revamping) taking longer than expected, and unavailability of raw materials that reduced is ability to produce PVC.
Westlake’s FM could push prices to levels not seen since 2014, said Rob Stier, senior lead of petrochemicals for S&P Global Platts. “Combining the operational problems experienced during August with Westlake’s force majeure, it is possible that we revisit these 2014 high PVC prices,” Stier said. These force majeures will tighten PVC supplies further in North America, where sales in recent months have recovered from early-year weakness from the COVID-19 pandemic.
Recent PVC demand has been strong, especially in construction-related uses, which account for around 60 percent of PVC consumption in the country. PVC makers are reported to have reduced inventory levels to just over seven days in July — a relatively low level — which has tightened supply and allowed prices to climb higher.
Other Force Majeures:
Sasol: FM declared Aug. 31 on all North American polyethylene, including HDPE grades. Read more.
INEOS Olefins & Polymers USA: FM declared Aug. 26 on HDPE at their unit in La Porte, Texas; plant is a joint venture with Sasol. HDPE pipe may become limited, so consider stocking alternatives we offer for your customers.
PVC Pipe Mills:
In March and April, PVC pipe mills, along with resin producers, reduced production levels ahead of an anticipated slowdown due to Covid-19. Shortly after, production was ramped back up because the slowdowns never came to fruition. The PVC market remained busy, with demand actually growing from both inside the United States, and abroad.
With resin producers in Louisiana declaring force majeure, PVC Pipe mills have a much longer wait time for the PVC resin required for production. The already-tight PVC pipe and fittings supply is going to get even tighter, which may result in longer lead times and price increases.
How Merfish United can Help:
Merfish United is united with our customers, and we’re in this together.
During this time of extreme market volatility, where mill supply is tightening and costs are rising, use us to buy what you need, when you need it. With us, become more competitive and manage your risk on volatile commodity products while turning inventory more quickly. Mix-and-match PVC Pipe products with other Steel Pipe, Copper Tube, Conduit, Strut and Threaded Rod products to make our low weight minimums for FFA.
Call your Merfish United representative to place orders now: 1-800-777-7473