Katrina said to hit 20 pct of capacity of key chemical
Thu Sep 1, 2005 04:27 PM ET
NEW YORK, Sept 1 (Reuters) - Hurricane Katrina has shut or cut production of ethylene at plants that are responsible for a fifth of the U.S. capacity, chemical industry experts said on Thursday.
Ethylene is a key building block for other materials and influence other chemical prices. It is used to make antifreeze and plastics for food packaging, diapers, garbage bags, and pipes.
According to data from CMAI, a Houston-based chemical consulting firm, the storm forced the closure or slowdown of at least 10 ethylene plants in Louisiana and Mississippi, states ravaged by Katrina's 140 mile per hour (225 kph) winds and 30-foot (9-metre) storm surges, earlier this week.
Ethylene units hurt by the storm include Dow Chemical Co.'s Taft and Plaquemine, Louisiana, facilities, Exxon Mobil Corp.'s Baton Rouge site, and Shell's Norco operations, according to CMAI.
Louisiana ranks as the third largest U.S. chemical producing state.
"Twenty percent of the ethylene capacity in this country has been affected," said Kevin Swift, chief economist with the American Chemistry Council, a leading chemical trade group.
The 20 percent comprises roughly 12 billion pounds of affected production in the U.S. Gulf Coast region, out of a total U.S. capacity of 62 billion pounds.
Production also is constrained by lack of electricity, raw material supplies and transportation links to plants, Swift said.
Dow Chemical, a leading U.S. ethylene producer, on Thursday said Hurricane Katrina has prompted it to declare force majeure on all grades of the chemicals triethylene glycol (TEG) and tetraethylene glycol (Tetra) from its St. Charles Operations (SCO) in Hahnville, Louisiana.
The two chemicals are derived from ethylene and used in construction materials, paint and automobiles.
By declaring force majeure, an exporter does not have to bear financial responsibility for delays in shipments, which breach contract agreements with importers.
Production of TEG and Tetra at SCO was idled earlier this week as a standard precautionary measure ahead of the storm, Dow said. Dow said it was likely that disruptions to TEG and Tetra supply will persist, although it could not give a specific timeline.
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