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US Producers Face Challenges with Weather and Electric Grid Concerns

US petrochemical and polymer producers face two potential threats to the market with a looming storm system in the Gulf Coast and a tight power grid in Texas. The potential threats come as US polymer available remains scarce, alongside continued strong demand.

The National Hurricane Center (NHC) said there is a high chance of a tropical or subtropical depression forming in the western Gulf of Mexico by Thursday night or Friday and is headed between Houston and New Orleans. A depression in the US Gulf could mean flooding rain or coastal flooding in the region into Father's Day weekend.

Hurricane season began on June 1, but there have been no named storms or hurricanes that have entered the US Gulf yet.

Nearly every major refinery and producer has a procedure in place for a major storm or hurricane, but some market participants are also keeping an eye on the Texas electricity grid.

The Electric Reliability Council of Texas (ERCOT) asked Texans this week to reduce electric use as much as possible through June 18. The electric council said a significant number of forced generation outages combined with potential record electric use for June has resulted in tight grid conditions.

Generator owners have reported approximately 11,000 MW of generation is on forced outage for repairs; of that, approximately 8,000 MW is thermal, and the rest is intermittent resources.

"We will be conducting a thorough analysis with generation owners to determine why so many units are out of service," said ERCOT Vice President of Grid Planning and Operations Woody Rickerson. "This is unusual for this early in the summer season."

According to generation owners, the number of outages should decrease throughout the week.

Operations at several Texas refineries and petrochemical plants went offline in February due to severe winter weather, which shut down the state's power grid and left a large majority of residents without essential utilities. Power outages caused by the freeze also disrupted supply chain management and logistics within the energy industry.

Some buyers have already prepared and started buying resin ahead of heavy rain expected in the Gulf Coast this weekend. However, with resin still tight, trade sources have said any impact to the market, large or small, would squeeze inventory further and send prices higher.

By Brian Balboa for The Plastics Exchange.

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