The near-Arctic temperatures that settled over Texas in February triggered blackouts on a massive scale and led to chemical factory shutdowns. Global supply chains were disrupted, and a shortage of raw materials arose. Every industry, from pharmaceuticals to electronics, felt the brunt of the polar storm. More than a month later, many plants remain inactive, and analysts predict it could be a while before everything returns to normal.
The world’s largest petrochemical complex was brought to a standstill. As supplies tightened, the prices for polypropylene, polyethylene, and various chemical compounds used in the manufacture of computers, auto parts, and plastic products hiked to their highest levels in years. For instance, the price of polyvinyl chloride has more than doubled since last year, according to S&P Global Platts.
Chemical distributors and analysts foresee delays and cost increases for home builders, automakers, and numerous other businesses, with the effects, eventually felt by end consumers. The storm’s growing economic price tag has caused these shortages and forced chip manufacturers to curtail production, exacerbating the existing semiconductor shortfall.
In the aftermath of the storm, U.S carmakers, including General Motors and Ford, halted production at most of their North American car factories, citing supply chain challenges. Power utilities in Austin instructed NXP Semiconductor and Samsung Semiconductor to suspend operations, disrupting supplies to customers such as Intel.
However, the effects of the cold weather are predicted to persist across the petrochemical sector, particularly at plants in Louisiana, Texas, and parts of Mexico. About 80-85% of the production of polypropylene and polyethylene, the two most widely produced polymers in the world, went offline during the storm. 57% capacity of PVC, extensively used in the electronics, medical equipment, and automotive industries, was also shut down. As a consequence of the propylene shortage, a supply deficit of propylene oxide critical for the production of polyurethane plastics ensued. Meanwhile, the supply of acetone went down as two large producers, Shell and Olin Corp, declared force majeure, and spot prices skyrocketed to a record high.
Moreover, with 80% of US benzene production capacity cut down, the styrene market was also upended. As three major producers announced force majeure, spot prices surged, and the supply shortage spilled over to other regions as the United States is a significant exporter of styrene. The acrylonitrile market had been facing sustained demand, pushing prices up to a nine-year high in the US, in turn impacting the prices of styrene-acrylonitrile and acrylonitrile-butadiene-styrene.
In Europe, polyethylene, PVC, and polyamides like nylon 6,6, experienced restricted supply. According to ICIS, the prices of polypropylene and polyethylene rose by 25% since December, the highest since 2015. The supply shortage was predicted to negatively impact the production of packaging materials used in consumer goods and medical appliances industries.
One cannot stress more the importance of keeping abreast of ongoing supply challenges both in the United States and Europe. Chemical supply companies should enact appropriate contingency measures for securing critical materials from alternative suppliers in unaffected regions. Understanding the impact of shortfalls and price surges on their corresponding sub-tier supplier network is also essential.