US petrochemical logistics holding up so far amid COVID-19: sources

Companies in the US resin supply chain said they are packaging and moving goods as normal so far amid the coronavirus pandemic response, though they expect a coming shortage of empty containers to fill with export-bound material.

"Other than the Port Houston scare from last week, our container availability has remained stable," said Brandon Huynh, vice president of sales at Katoen Natie, a global logistics provider with resin packaging operations at sites in Texas, Louisiana and Virginia.

That scare referred to a day-long shutdown last week at the Port of Houston Authority's pair of container terminals along the Houston Ship Channel after a worker was diagnosed with COVID-19.

Packagers, who package polyethylene and polypropylene pellets and polyvinyl chloride powder for export and domestic distribution, closely watch critical pieces of the supply chain, as do logistics providers and trucking companies.

Those companies have added more than 6 million mt/year of new packaging capacity -- mostly for polyethylene, the resin that makes the world's most-used plastics -- since 2017 to handle 13.67 million mt/year of new PE capacity that has come online, is under construction or planned from 2017 through the 2020s.

A year earlier, that supply chain was overloaded with new PE output, leading to full railcars parked in storage-in-transit, or SIT, yards awaiting arrival to warehouses for packaging. The overloading prompted railroads to issue embargoes preventing more full railcars from arriving, until the SIT yards started to clear, to keep their rail networks fluid.

The backup impacted product pricing, essentially creating more inventory that was stuck in transit.

However, those backup issues largely did not repeat themselves in late 2019 and early this year after several packaging capacity additions came online last year and companies added spots for more rail cars at SIT yards.

FEWER ASIAN CARGOES, FEWER CONTAINERS

Concerns now have turned to the coronavirus pandemic response. Ocean services from Asia and Europe declined in February and this month as China, South Korea and other countries implemented shutdowns and other measures to combat the coronavirus disease spread, which reduced incoming import containers to be unloaded and then reloaded with exports.

Panjiva, a research arm of S&P Global Platts, said US seaborne imports of cars, trucks and commercial vehicles fell 3.3% in February. South Carolina's ports, a growing export route for US resin, saw container traffic surge in February with a 13.5% rise in imports of loaded containers, but Panjiva data showed a 27% year-over-year decline in seaborne imports to Charleston in the first half of March.

Paul McClintock, senior vice president at the South Carolina State Ports Authority, said in an interview that overall container availability remains good with 15,000 on site, and port activity remains strong with workers taking precautions as recommended by the US Centers for Disease Control. Other ports that handle resin, including Houston and Savannah, Georgia, said the same at this time.

California ports in Los Angeles, Long Beach and Oakland showed a 24.1% slide in container cargoes in February, Panjiva said. US West Coast ports receive most shipments from Asia, and will show the fallout of fewer ships arriving before those along the US Gulf and East coasts as ships travel through the Panama Canal.

"Aside from a slide in total volumes, the logistics industry also faces the challenge of a shortage of empty containers," Panjiva said.

Ports, trucking and other transportation infrastructure are among those industries deemed critical by the US Department of Homeland Security to continue operations as other businesses shut down or slow operations amid the COVID-19 response.

The city of Houston and Harris County on Tuesday issued stay-at-home orders except for such essential businesses, including transportation systems like ports and trucking companies, the chemical industry, and critical manufacturing.

"We take it to mean we do what we do until we're forced not to," said a logistics source involved in both packaging and trucking.