Harvey hacked away Gulf Coast plastics traffic

Basic chemicals for synthetic fibers and certain auto parts now in short supply
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Rails and ties from a partially washed-away Union Pacific bridge dangle over swollen waters of the San Jacinto River near Houston during Labor Day weekend. The flood waters and damage are the remnants of Hurricane Harvey.
Tom Kline
HOUSTON — Railroad companies serving the U.S. Gulf Coast in Texas stand to take a significant financial hit as their customers struggle to recover from Hurricane Harvey.

Hurricane Harvey and its floodwaters forced refineries from Corpus Christi to Beaumont to shut down, effectively reducing the United States's oil production by one-fifth. Reduced capacity has caused nationwide price spikes and fuel shortages in locations as far north as the Oklahoma border.

The shortages prompted Secretary of Transportation Elaine Chao to earmark a total of $125 million dollars to help assess and rebuild the infrastructure. The Department of Transportation has also temporarily reduced weight and size restrictions on fuel shipments.

With floodwaters still high and a number of the refineries sustaining critical damage — most notably, a plant that caught fire and exploded in Crosby, Texas — it may be some time before petroleum based shipments originating in and out of the Texas coast reach their former level.

The closed refineries have also caused a scarcity of ethylene and polypropylene, two chemicals which form the bedrock of the plastics industry and are used in the production of a host of everyday chemicals ranging from plastic bottles to PVC pipe to clothing. Bloomberg reports that approximately three-fourths of the ethylene produced in the United States originates in Texas. Hurricane Harvey forced so many petrochemical and plastics plants to close that the production of both chemicals has been reduced by about 60 percent.

Bloomberg cites a Wall Street analyst saying that destruction and havoc Harvey caused in the U.S. chemicals industry is “unprecedented.”
For the railroad industry, the effect of the chemical shortage is acute: Not only do carriers stand to lose revenue from the shipment of raw plastics, shipments of finished plastic products and products typically packaged in plastic containers are expected to be reduced. Furthermore, the shutdown of refineries and plastics manufacture has led to a reduced demand for natural gas.

Hurricane Harvey has also curtailed grain shipments coming in and out of Texas ports. The U.S. Coast guard closed ports around Houston, Galveston, and Corpus Christi completely. The week of the storm, Reuters reported, federal inspectors did not inspected any wheat shipments originating from Texas. Typically, about 200,000 tons of wheat moves in and out of the state's ports, much of it shipped by rail.

Some ports are beginning to reopen, but Tara Artho, president of the Texas Grain and Feed Association, told Reuters that ports have limited capacity to expedite shipments backlogged due to the hurricane.

On Wednesday, Union Pacific's Chief Financial Officer Rob Knight said at the Cowen & Co. investment conference in Boston that the lost traffic and cost of repairing the network would likely reduce shares by 5 cents. Kansas City Southern CEO Patrick Ottensmeyer said at the same event that while KCS did not suffer the bridge damage or
severe washouts that struck UP and BNSF tracks, the company also expects shares to go down by 5 or 6 cents.

All three Class I railroads serving the Texas coast issued embargoes during the storm, and are still in the process of assessing the damage, and have not released estimates as to the cost or timeline of restoring their networks.

NEWSWIRETrains News Wire

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