Damage to ethylene -producing capacity a nail in the coffinof industrial civilisation

Most people think this is just about plastic bags. It is not. It encompasses just about everything that is used by modern civilisation.

It is a major nail in the coffin of industrial civilisation along with other damage to the oil industry and the insurance industry.

If you do not understand this you should watch Mike Ruppert’s film, ‘Collapse’

"The destruction of ethylene capacity, covered by Bloomberg but which this article does NOT touch on, is a HUGE nail the coffin of industrial civilization, as Robin said and Wendy elaborates. In light of that, the problem with this article is it overfocuses on plastic bags, tarps and moulding. The elephant in the living room, however, is the loss of ethylene in the supply chain."

---Michael Green

Plastics firms take stock of damage from Harvey

PlasticsNews,

1 September, 2017

At plastics plants near Houston and along the Gulf Coast, managers are taking note of damage and making plans to bring production fully back on line.

Cloeren Inc.’s headquarters site in Orange, Texas, was filled with more than 4 feet of standing water and lost power. Co-owner Alicia Cloeren said her own house was spared but she was among those evacuated to safety.

“Harvey has been catastrophic for my small town. Tuesday morning we were rescued by the Cajun Navy,” she said in an Instagram post showing her with a toddler in a small motor boat.

Cloeren’s two other Orange facilities, which make extrusion feedblocks and dies, were dry but without electricity. Power isn’t expected to be restored for seven to10 days, according to an Aug. 31 update by Cloeren and her father, Peter Cloeren, who asked customers for patience.

“We are experiencing the most catastrophic storm of our lifetime. Hurricane Harvey targeted Orange, Texas, with full force Tuesday night, causing mass destruction,” according to the update. “As things develop, we will update you with further information on our recovery process.”

Finding a way in

Production at American Bag Manufacturing Inc. in Houston is expected to resume early in the week of Sept. 4 following repairs to a damaged roof that let in the pounding rains. Sam Trevino, who works in sales, was the first employee to make it to the facility.

“I live nearby and I’m the only one who could find routes to drive around the water and get here,” Trevino said in a phone interview. “I’m tearing out carpet, taking orders and answering some emails.”

The operation closed Aug, 24, he said, as Hurricane Harvey gained strength and took aim at the Texas coast. It made landfall a day later as a Category 4 storm. The business makes plastic bags for grocery baked goods and deli items.

“We have inventory in stock and that will get us through until we’re up again,” Trevino said. “It’ll be tight until we catch up but we should be OK.”

Similar scenarios played out at many plastics processors coping with the aftermath of Harvey. Nearly 700 businesses in the state sustained damage, according to the Texas Department of Public Safety.

Texas ranks third in the United States for plastics employment and first in plastics shipments, according to the Plastics Industry Association. The association has 49 members in Texas, including 16 in hard-hit Houston. Companies reached by Plastics News were eager to get back to normal.

After pumping out a couple inches of flood water, Integrated Molding Solutions Inc. reopened in Houston, but with a skeleton crew.

“We’re better off than some businesses. That’s for sure,” Production Manager Bob Berndt said. “We were shut down about three days and we’ve called back employees. Some have made it in but others have problems. Their neighborhoods are flooded and they just can’t get out.”

The injection molder serves customers including Baker Hughes, Hewlett Packard, Jabil and Foxconn, and the limited staff is trying to catch up.

“We were pretty busy,” Berndt said. “Being down for three days puts us significantly behind.”

Offering extra capacity

All-Plastics LLC in Addison, Texas, has extra capacity and is offering to help any businesses dealing with building damage.

“It’s a tragedy to see everything that has unfolded with this storm,” Marketing Manager Jennifer Latiolais said. “We’re here to support the businesses that need our help due to the tragedy of Harvey. We’ve been very lucky. We haven’t been affected at all. If any Texas injection molders need help, they can call us. They’re local to us and if they reach out, we can talk directly.”

However, a lot of businesses were plagued with phone issues. The staff at Providence, R.I.-based Tarnell Co. LLC, which provides support services to the plastics industry and focuses on the secondary supply chain, has been contacting companies to assess damage and needs. They attempted to reach about 335 of the more than 400 companies they deal with in Texas as of Aug. 31.

“Of these attempts, 55 companies confirmed moderate or more significant storm-related interruptions and 73 said they didn’t have much impact if any at all,” owner Stephen Tarnell said. “But, more significantly, the majority were unreachable. So you don’t how severe it is other than they have interrupted phone service.”

Tarnell said the 335 companies purchased about $134 million of resin in the first quarter of 2017. Their status, and the availability of resin, could affect end markets ranging from pipe to packaging.

“This has turned out to be a likely, very scary perfect ugly storm,” Tarnell said.

GSE Environmental Inc., which extrudes geosynthetic liners in Houston, weathered the storm, thanks in part to preparations made during a controlled shutdown Aug. 25-26 that included pumping down some storm water ponds at the site.

“I’m sure it helped. We had some place for the excess water to go. When the rain came it was bands that produced 5 inches an hour, then it slowed and you’d be hit hard again. For a couple days it didn’t stop,” said Steve Eckhart, vice president of marketing. Most of the 200 employees returned to work.

Harris County Sheriff's Department A Harris County Sheriff's Department deputy helps a toddler during evacuations from Hurricane Harvey-related flooding.

Helping out employees

Two GSE employees, however, had to evacuate their homes. The business put them up in a hotel. One woman, who is 7½ months pregnant, will be able to return to her house, but not the other employee.

“One had 6 feet of water in her house. That’ll be a loss,” Eckhart said.

Vicky Despeaux, human resources manager at SemaSys Inc., which makes point-of-purchase products, also said some of its 60 employees in Houston are facing personal losses while the corporate office and plant were spared water and wind damage.

“They’re dealing with flooding and had to evacuate,” Despeaux said. “One had water to the ceiling and will have to completely rebuild. Another had 20 inches of water in the house. We’ve reached out to them and we’re trying to put plans in place to help get them through this disaster. It’s pretty frightening. I’ve lived through it. A number of years ago I lost my home to Tropical Storm Allison.”

Despeaux volunteered at a shelter Aug. 29 and was assigned to collect bedding and towels for displaced residents.

“People waited in line to drop off donations,” she said. “It was pretty amazing. About 7 p.m., probably a thousand people were brought in to sleep. Lots of universities and churches have opened their doors. People are working to make others as comfortable as they can be. The wonderful thing is how people have come together.”

Parker Hannifin Corp., which specializes in seals for motion and control technologies, has a disaster relief fund to provide money directly to personnel coping with damage and flooding. The Cleveland-based company has 11 facilities and 356 employees in the greater Houston area.

Berry Plastics Global Group Inc. closed two plants indefinitely to assess damage — in Victoria and Beaumont — while Inteplast Group expected to reopen its Lolita operations on Aug. 30.

Berry extrudes institutional can liners and retail trash bags in Victoria while the Beaumont facility reprocesses resins. Inteplast extrudes PVC products, such as decking, molding, siding and reusable shopping bags, at its 575-acre Lolita campus, which has numerous buildings.

“Although our Lolita site sustained roof and other structural damages, thank God we were largely spared and thus we should be able to recover quickly for the sake of all our employees as well as customers,” Inteplast Group President John Young said.

Some employees worked around the clock to minimize damage at the facility “despite outages and losses at home,” Young added.

Although manufacturing at the site will ramp up again, shipping and receiving could remain a problem. Inteplast plans to use “the fully functioning roads” in San Antonio and Austin as alternative transportation routes.

Hurricane Harvey battered the Houston area for six days, dropping more than 50 inches of rain and setting a record for total rainfall from a single tropical storm, according to the National Weather Service.

Local officials reported more than 40 storm-related deaths in Texas before the storm moved east toward Louisiana.

Making donations

The Manufacturers Association for Plastics Processors contacted dozens of its members in Texas to see if any need help.

“We have a response network on our website. It’s our member forum and you can reach out for help,” MAPP Marketing Director Marcella Kates said. “We have an emergency alert system to quickly email other members in an instant, if for example, their machine is down and they need something ASAP.”

The American Red Cross also is collecting products to help with disaster relief and the Plastics Industry Association is asking its members to contribute. The relief agency is seeking donations of 17,000 tarps, 19,000 storage totes and 3,000 coolers.

The Red Cross needs:

Mold-resistant high density polyethylene tarps that have been UV-treated on both sides and have rope-reinforced hemmed edges.

20-to-30-gallon plastic totes with lids for storing and transporting items.

Coolers that hold 28 to 36 quarts.

“They anticipate needing these items throughout the next several weeks, so please consider giving even if you need to ship the items in September,” an association letter says. To donate, contact Tim Wahlers, a regional philanthropy officer at the American Red Cross, at 703-638-2906 or tim.wahlers@redcross.org.

KL Outdoor, a Muskegon, Mich.-based company and the world's biggest kayak maker, donated 2,000 kayaks for rescue and relief efforts after getting a call from Walmart’s disaster response team. The company also sent a truckload of flat-bottomed boats to a Houston sporting goods chain.

The International Association of Plastics Distribution has partnered with the Atlanta Plastics Charity Golf Tournament to raise money, for both member company employees and nonmembers in the plastics industry.

IAPD CEO Susan Avery said “knowing we have many colleagues who have lost everything, it is vital to IAPD to help aid in their recovery.” The deadline to both make a donation and apply for assistance is Nov. 1. Donors can help at www.atlantaplasticscharity.org.

KraussMaffei Group is collecting money, too, and thanking those who contribute $1,000 with a $1,000 credit for spare parts. The company will donate the money to the American Red Cross. Barb Farrell is handling credit card donations at bfarrell@krauss-maffeicorp.com or checks written to the Krauss-Maffei Corp. Hurricane Harvey Disaster Relief Fund and mailed to Farrell at 7095 Industrial Road, Florence, KY 41042.

In addition, employees of tooling component supplier Progressive Components Inc. are collecting items and coordinating delivery to the hardest hit areas. The Wauconda, Ill.-based company also is providing a monetary match to what is collected, and will offer Texas customers extended payment terms and expedited orders.

“The devastating effects of Hurricane Harvey and the unprecedented flooding that is happening in Houston and the surrounding areas is beyond comprehension,” owners Don Starkey and Glenn Starkey said in a letter. “As image after image comes across the media, our hearts are breaking a little more for you and all our friends in the region.”

See this also about supply chains

Harvey Has Made the World’s Most Important Chemical a Rare Commodity

• Ethylene used to make cars, milk jugs, paint and mattresses
• More than half of U.S. production has been knocked out

Bloomberg,

1 September, 2017

Few Americans care about ethylene. Many have probably never heard of it.

As it turns out, this colorless, flammable gas is arguably the most important petrochemical on the planet -- and much of it comes from the hurricane-stricken Gulf Coast. Ethylene is one of the big reasons the damage wrought by Hurricane Harvey in the chemical communities along the Gulf of Mexico is likely to ripple through U.S. manufacturing of essential items from milk jugs to mattresses.

“Ethylene really is the major petrochemical that impacts the entire industry,” said Chirag Kothari, an analyst at consultant Nexant.

Texas alone produces nearly three-quarters of the country’s supply of one of the most basic chemical building blocks. Ethylene is the foundation for making plastics essential to U.S. consumer and industrial goods, feeding into car parts used by Detroit and diapers sold by Wal-Mart Stores Inc.

With Harvey’s floods shutting down almost all the state’s plants, 61 percent of U.S. ethylene capacity has been closed, according to PetroChemWire. Production may not return to pre-storm levels until November, according to Jefferies.

Ethylene occurs naturally -- it’s the gas given off by fruit as it ripens. But it also lies at the heart of the $3.5 trillion global chemical industry, with factories pumping out 146 million tons last year, Kothari said Thursday.

Processing plants turn the chemical into polyethylene, the world’s most common plastic that’s used in garbage bags and food packaging. When transformed into ethylene glycol, it’s the antifreeze that keeps engines and airplane wings from freezing in winter, and it becomes the polyester used in textiles and water bottles.

Ethylene is an ingredient in vinyl products such as PVC pipes used to bring water to homes, life-saving medical devices and cushy sneaker soles. It helps combat global warming with polystyrene foam insulation and lighter, fuel-saving plastic auto parts. It helps commuters get to work safely when made into synthetic rubber found in tires. It’s even an ingredient in house paints and chewing gum.

Man makes the chemical by starting with oil or natural gas, then steam heating it to 1,500 degrees Fahrenheit (816 Celsius) inside massive furnaces that crack apart the molecular bonds. The resulting ethylene gas is separated from co-products such as propylene, and then piped to other production units for conversion to a vast array of products.

Ethylene and its derivatives account for about 40 percent of global chemical sales, said Hassan Ahmed, an analyst at Alembic Global Advisors. The U.S. accounts for one of every five tons on the market, and ethylene plants globally were running nearly full out to meet rising demand before Harvey, he said.

“So any little hiccup -- and this is much beyond a hiccup -- will dramatically tighten supply-demand balances,’’ Ahmed said Thursday.

While Gulf Coast chemical plants are designed to withstand hurricane-force winds and floods, Harvey has thrust the industry into uncharted territory. Ethylene producers hit by the storm along the Texas Gulf Coast include LyondellBasell Industries NV at the southern end in Corpus Christi, Exxon Mobil Corp. in Baytown outside Houston, and Chevron Phillips Chemical Co. in Port Arthur by the Louisiana border.

Market Havoc

“The combination of Harvey’s path, duration and rainfall total is wreaking havoc with the supply side of the U.S. chemicals industry on an unprecedented scale,” said Kevin McCarthy, an equity analyst at Vertical Research Partners. “We certainly haven’t seen anything quite like it in our 18 years of following chemical stocks on Wall Street.”

The sudden dearth of ethylene and other materials is being felt up and down the supply chain. More than half of the country’s capacity for making polyethylene plastic has been shut down in the past week. More than 60 percent of production of polypropylene -- another plastic, has been curtailed.

Chemical and plastics buyers can operate about only two weeks before exhausting their inventories, Jefferies analyst Laurence Alexander said in a note. Many producers are already telling customers that they won’t be able to meet their contractual supply obligations because of the storm.

Missing Commitments

Formosa Plastics Corp., which shut its Point Comfort, Texas, ethylene and plastics plants ahead of the storm, said Aug. 30 that it won’t be able to meet commitments for polyethylene, polypropylene and PVC.

With so much chemical production in the region out of commission, demand for natural gas has plummeted. Producers such as Dow Chemical Co. use gas as a raw material for ethylene and also to power their massive cracking furnaces and other equipment. Added to the impact from widespread electricity outages, demand for gas fell by more than 5 billion cubic feet a day, according to Citigroup Inc. That’s equal to nearly 8 percent of the country’s normal consumption this time of year.

Demand for other key raw materials used to make ethylene, such as ethane and butane, have fallen about 90 percent because of plant closures, according to PetroChemWire.

Given the complexity of the ethylene manufacturing process, and the need to carefully assess damages to ensure safe restarts, it may take many more weeks for production to reach pre-Harvey levels, IHS Markit said in a report Thursday. Jefferies analysts expect much of the lost petrochemical production will return in October with the remainder starting up the following month.

Restart Surprises

Companies won’t know for sure whether their plants were damaged until they try to restart them, perhaps only then finding that flood waters have ruined a key piece of equipment, Ahmed said.

“No one right now has a very good handle on the full extent of the damage,” Ahmed said.

Even if most of the chemical industry gets back on its feet in the coming weeks, logistical challenges could still stymie the flow of supplies to customers and create supply chain bottlenecks. Rail shipping has been constrained by train tracks damaged by flooding or still under water.

Polypropylene producers could face an average delay of two weeks to ship their product via rail because of the storm, according to IHS. Some resin buyers are seeking supplies outside the U.S. in case of an extended disruption, the consultancy said.

Prices for ethylene-derived products, meanwhile, have begun to show signs of the looming shortage. Polyethylene prices globally have begun to climb on the expectation that U.S. exports will be slashed, IHS said.


Bloomberg is obliged to be optimistic. Optimism is the absence of realism