Anticipate Disruptions from Hurricane Delta Across the U.S. Gulf States

Anticipate Disruptions from Hurricane Delta Across the U.S. Gulf States

Amid an unusually active hurricane season in the U.S. Gulf Coast, supply chain managers should anticipate further disruption this week as a new powerful storm named Hurricane Delta is expected to make landfall along the Louisiana coastline on October 9 or 10 as a major hurricane, with wind speeds of 100 mph (160 km/h). The storm is the seventh tropical storm to impact stretches of the U.S Gulf Coast since the start of the hurricane season on June 1. 

As a Category 3 hurricane on the five-tier Saffir-Simpson scale, Delta is likely to bring strong winds and heavy rains within its path that could result in widespread flooding, power outages, and associated manufacturing disruption across industrial clusters of the petrochemical industry in Louisiana and Texas. In addition, ports along the Gulf Coast from Port Arthur in Texas to New Orleans in Louisiana remain on high alert and could potentially shut down operations depending on the actual trajectory of the storm system. Once inland, Delta is expected to weaken as it moves northeast across the Mississippi River valley. 

Storm likely to complicate production recovery in the petrochemical industry

During the 2020 hurricane season, multiple storms have disrupted supply chain operations along the coastline between Texas and Alabama. The strongest storm so far, Hurricane Laura, made landfall on the U.S. Gulf coast on August 27 as a Category 4 hurricane. In the wake of continued COVID-19 and other operational issues at the plants, the hurricane disrupted energy and chemical clusters in Texas, Louisiana, and Alabama that have yet to fully recover production output. Multiple force majeure notifications remain in effect until further notice. 

At the time, the greatest impact on production was experienced in the Lake Charles area of Louisiana and the Beaumont area of Texas where major petrochemical companies, including Sasol and Indorama Ventures, shut down operations in advance of Hurricane Laura’s landfall. Following the storm’s impact, power outages in the areas caused additional issues and prevented some plants from restoring full operations, forcing them to declare force majeure. 

Amid the restart phase, approaching Hurricane Delta threatens to further complicate efforts to restore normal operations and lift force majeures in the coming weeks. Several plants have already begun to again shut down operations out of precaution, in particular in the Lakes Charles area in western Louisiana. Among these companies are Lotte Chemical, Bridgestone Firestone, and Philipps 66. 

Damages from wind and flooding as well as continuous power outages could cause additional production challenges, with some force majeures potentially lasting well into November. 

CompanyPlantProductStart of force majeureReason
LyondellBasellBayport and Channel View, TXPropylene oxide (PO)Oct 7Leak
Ineos PhenolMobile, ALAcetoneOct 1COVID-19
DowFreeport, TXMethylene diphenyl diisocyanate (MDI)Oct 1Recent storms
Formosa PlasticsPoint Comfort, TXSpecialty Polyvinyl chloride (PVC)Sep 29Feedstock shortages and breakdown issues
DAK AmericasPort Bienville, MSPolyethylene terephthalate (PET)Sep 17Feedstock shortages
CovestroBaytown, TXPolycarbonate (PC)Sept 10Hurricane Laura
CovestroBaytown, TXToluene diisocyanate (TDI)Sept 1Hurricane Laura
Chevron Phillips Chemical Orange, TXPolyethylene (PE)Sept 1Hurricane Laura
Indorama VenturesPort Neches, TXEthylene oxide (EO)/ ethylene glycol (EG)Aug 31Hurricane Laura
SasolLake Charles, LAPolyethylene (PE)Aug 31Hurricane Laura
Westlake ChemicalLake Charles, LAConstruction staple polyvinyl chloride, vinyl chloride monomerAug 31 Hurricane Laura
LyondellBasellBayport, TX; Lake Charles, LAPolypropylene (PP)Aug 27Hurricane Laura
Lotte ChemicalLake Charles, LAEthylene glycol (EG)Aug 26Hurricane Laura
INEOS Olefins & PolymersLa Porte and Alvin, TXPolypropylene (PP)Aug 25Hurricane Laura
LyondellBasellChannelview, TXButadiene (BD)Aug 21Reboiler failure
Formosa PlasticsPoint Comfort, TXPolypropylene productsAug 10Production outage
Overview of force majeures that remain in effect (as of October 9) at chemical producers across the U.S. Gulf Coast. Source: Everstream Analytics

Ports from Texas to Louisiana prepare for hurricane-force winds 

In addition to production challenges, Delta is expected to disrupt operations at ports located in eastern Texas and Louisiana. The largest ports in the area, Port of Houston and Port of New Orleans, have been put on port condition Yankee, meaning that hurricane-force winds can be expected within 12 hours. Other ports monitoring the storm include Lake Charles, Beaumont, and Port Arthur. As the storm moves closer to the coast, restrictions on vessel movements and port operations may increase further and short term port closures may result in congestion with increased vessel waiting times, while yard operational stoppages could create container backlogs in the terminals. 

Similarly, road and rail freight services across the region are expected to be impacted by flooding and infrastructural damages caused by heavy rains and severe winds. According to meteorologists, Delta could bring 4 to 8 inches of rain to the central Gulf Coast with an isolated maximum of 12 inches. Major roads, including Interstate 10, could become inundated with water, causing congestion and delays. Long traffic jams have already been reported on October 8 due to residents moving out of the Lake Charles area. 

Railroad operator Norfolk Southern has begun preparing for potential service disruptions, protecting infrastructure, and repositioning rail equipment from low-lying areas around New Orleans. Similarly, BNSF is holding all New Orleans-bound trains from moving into the area. Other rail service providers, such as Union Pacific and Kansas City Southern, have also circulated advisories on Hurricane Delta. In anticipation of its landfall, the City of New Orleans has begun to close flood gates on October 7, effectively ceasing interchange with eastern rail carriers until further notice. 

Customers should expect disruptive impacts to production and logistics operations in areas ranging from eastern Texas to New Orleans in Louisiana from today, October 9, with the storm potentially causing prolonged production outages and longer shipping times as well as delays in the weeks to come. Companies are advised to monitor impacts on their key suppliers and logistics hubs in the affected areas and activate contingency plans to minimize supply chain disruptions where possible. 

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