The Aftershocks of The Texas Freeze

The March Specialty Polymers Issue 🦁

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Prices are Going Up Due to Scarcity if Available🚀

Lilli Manolis Sherman reported for Plastics Technology back in February that prices on plastics were going up by double digits:

Polyethylene prices rose 6¢/lb following the December 5¢ increase, and suppliers announced a 7¢ increase for February, according to Mike Burns, RTi’s VP of PE markets, PCW senior editor David Barry, and The Plastic Exchange’s Michael Greenberg. Said Burns, “Prices are now 30¢/lb higher than they were in December 2019, without any significant cost increases to produce polyethylene.”

If anything Sherman’s reporting here was a harbinger of things to come in the next few weeks. The fact that our chemical and oil manufacturing networks were exposed to freezing events in mid-February means that a cascade of plant closures, force majeures, and scarcity has resulted in a supply chain implosion.

I am personally dealing with supply chain hell in my day job as I have described before on Sunday, but its getting bad enough that the Wall Street Journal has picked the story up and we are entering a full blown national crisis.

Christopher M. Matthews et al. reported for the Wall Street Journal that we are seeing a months long plastics shortage due to the Texas freeze. The freeze took multiple chemical and oil refiners off-line and many are still not back up and running as of March 17th 2021. Matthews, Hufford and Eaton reported that:

The shortages are part of a growing economic price tag of a storm that knocked out a third of natural-gas production in Texas and forced some chip makers to curtail output, exacerbating a semiconductor shortfall.

Honda Motor Co. said Wednesday it would halt production at most of its U.S. and Canadian car factories next week, citing supply-chain issues including the fallout from U.S. winter storms. Toyota Motor Corp. said it was recently informed that a shortage of petrochemicals will affect production at its car plants. Paint maker PPG Industries Inc. said a number of its suppliers have been affected by the problems in Texas. Container Store Group Inc. warned that the shortages could influence profit margins at the storage and shelving retailer.

If you want to understand how refined oil, chemicals, and polymers play a fundamental role in our economy then this story ties it all together. The majority of our manufacturing industries are going be effected by the freeze and the force majeures. New home starts are going to be delayed. Packaging costs are going to increase. Paint is going to get more expensive. With already high lumber costs and a flurry of new housing starts consumers can expect to pay more money for materials.

If you are interacting with any modern material there is a high probability that the chemical industry and some sort of plastic or specialty polymer is involved. Think toilet paper is just made from nature? Think again. Yes, there is a chance that the chemicals used in toilet paper will be influenced here as well.

If you are a chemical company and you’ve got a good raw material inventory or a good product inventory then you are sitting on a gold mine. Many chemical companies have been raising prices or are in the middle of raising prices in both commodity and specialties. These price increases will get passed to the consumer eventually.

Mallard Creek polymers has raised prices for all their acrylics and styrene acrylics. AOC has raised prices multiple times on their resins and resin dispersions. BASF has raised prices on all of their dispersions and resins in North America. Kraton has increased prices for pine chemicals back in February and I’m guessing that is probably tied to the high lumber prices we are seeing right now in North America too.

Many of the specified positions of the large volume antioxidants and commoditized specialty products that are hard to displace could be replaced as people look to switch suppliers due to force majeures. A company like BASF can hold a price advantage because they built the biggest reactor to make a specialty product, have a large upstream advantage, and thus price their product lower than other companies. If BASF stops supplying to their low cost materials to the market this creates opportunities for the smaller companies with newer technologies to enter and get a foothold with customers.

This crisis isn’t over. If these plants cannot start back up in the next few weeks I suspect more companies will stop producing and thus revenues will decline in manufacturing again like they did back during the Covid-19 lockdowns. Matthews, Hufford and Eaton reported that:

A rapid, unplanned shutdown of some the country’s largest manufacturing plants occurred over a span of hours. At the peak of forced shutdowns, 75% of polyethylene capacity was shut, 62% of polypropylene capacity and 57% of PVC, according to S&P Global Platts.

The loss of power was compounded by shortages of water, which is needed in vast amounts for plant processes, and nitrogen, a key component used at plants to prevent fires. The freeze lingered for days, exposing millions of feet of aboveground metal pipe and equipment to dangerously low temperatures.

“The outcome was worse than even the worst hurricanes, including Hurricane Harvey,” said Kristen Hays, global market lead for polymers at S&P Global Platts.

Constrained or lack of ethylene supply mean you get a bunch of downstream derivative effects such as making ethylene oxide, which is used to make polyols and eventually polyurethanes. Ethylene oxide is also used to make ethylene glycol, which goes into making polyethylene terephthalate and antifreeze. You can polymerize ethylene into polyethylene of various densities, which go into packaging, release liners, automotive parts, and construction products like roofing underlayments, and EPDM rubber. Ethylene is also required to make ethyl benzene, a precursor of styrene. We use styrene to make polystyrene, polystyrene foams, and we also use it to dilute unsaturated polyesters to make composites. These are just some of the uses of ethylene.

The US is facing shortages in all of our platform chemicals. The majority of these platform chemicals come from refining oil and then further transformation through steam cracking or catalytic reforming. If someone wanted to cripple US manufacturing it doesn’t get much better than this right now. Texas and the companies who manufacture there are critical in enabling all of the downstream supply chains from oil and they may have been prepared for the next hurricane, but now they also have to be prepared for the next cold snap.

Saint-Gobain Invests in Continuous Fiber 3D Printing (CF3D)

Grace Nehls reported for Composites World that Saint-Gobain has invested in Continuous Composites to help develop and commercialize continuous fiber 3D printing technology. Nehls reported:

CF3D combines high performance continuous fiber with rapid curing thermoset resins to enable affordable manufacturing of complex composite structures. Continuous Composites says CF3D is an industry agnostic automated solution comprised of configurable hardware, proprietary software and tailorable materials solutions for strong, lightweight applications.

The investment was made through NOVA, Saint-Gobain’s venture arm. Sven Harmsen, the director of NOVA announced the deal on March 18th (the day I am writing this) to his network on LinkedIn. Saint-Gobain’s business is varied and includes construction products, abrasives, healthcare solutions, and infrastructure materials. They are kind of like the French version of 3M.

Back in January Hannah Mason reported for Composites World that Continuous Composites had struck a deal with Arkema’s Sartomer to develop UV curable thermoset resins for their continuous fiber additive manufacturing process. Sartomer is arguably one of the biggest names in UV curable resins. Mason reported:

To complement its CF3D printing system, which is an out-of-autoclave (OOA), scalable 3D printing technology based on the use of snap-cure resins and continuous fibers (read a more detailed description here: “3D printing composites with continuous fiber”), Continuous Composites required a catalog of resins that met the high-performance mechanical requirements of customers in industries ranging from aerospace to energy to defense. “Our business model is to provide machines, and their corresponding software and resins, to enable these customers to manufacture whatever component they’re going after in their specific industry application,” Alvarado says.

Continuous Composites is looking to sell printers, fiber, and resins to customers to enable them to build whatever they want. The fact that they are doing continuous fiber and resins that cure within seconds means that whoever buys and prints with Continuous Composites is doing so for performance. It would be interesting to see a cost vs performance breakdown against traditional high filler content composites.

I would love to see how big of a wind turbine blade that Continuous Composites could make with their technology and how the designs of such blades could be radically changed by using continuous fiber manufacturing.

Could wind turbine blades go bigger than possible now?

Could the costs be lowered even more than what they are now?

Overall, I’m really excited to see where Continuous Composites goes in the next few years. I don’t think we will be building houses with this technology, but I could see boats, bicycles, and automobile parts as a reality. Congratulations to the Continuous Composites teams and NOVA ventures. Looking forward to what gets built.

Talk to you next week,

Tony


The views here are my own and do not represent those of my employer nor should they be considered investment advice.

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