Hurricane Harvey has been forecast to cost the economy between $60 billion and $100bn, making it the second-costliest US hurricane since 1980.
Market analyst IHS Markit has made the prediction a month after the natural disaster having assessed national and regional economies, transportation infrastructure, automotive industry and the crude oil, refining and chemical sectors. It makes Harvey second only to Hurricane Katrina in terms of its damaging impact.
“We estimate that the hit to third-quarter GDP growth from the two storms (Harvey and Irma) will be about 1.2 per cent,” explained Patrick Newport, executive director of US economics for IHS Markit.
Says Kurt Barrow, executive director of oil markets, midstream and downstream for IHS Markit, unlike previous storms, the emergence of shale gas in the US meant that markets outside of the country were hit hard. The US has become a major exporter of crude, refined products and NGLs, and increasingly petrochemicals.
In the next decade, the US will build 25 per cent of the world’s needed capacity for new chemicals demand, explains Dewey Johnson, IHS Markit’s executive director for chemicals. Thus, US chemical exports will double from 2005 levels, linking the global chemical markets integrally to events that affect the US Gulf Coast.
“Due to minimal asset damage, the chemicals sector is recovering rapidly from Hurricanes Harvey and Irma,” said Johnson. “With that said, various value chains are not back to pre-event production levels due to bottlenecks from feedstocks or unit operations within the plants.”
Meanwhile, chemical product supply chains that were already in tight supply (propylene, polyethylene, etc) will see additional tightness perhaps lasting into the first quarter of 2018.