Braskem’s new hub helps consolidate southeast ports role to diversify resin supply chain risk

Braskem’s selection of Port Charleston for its new polypropylene export hub helps consolidate U.S. southeast ports as the alternative ocean shipping option for Gulf Coast resin producers that want to diversify supply-chain risk

Braskem's new polypropylene capacity project in Texas. Image shows construction advances as of May 2019. Project will be ready by September 2020. Image courtesy of Braskem.

The polypropylene (PP) export facility will open by September 2020, when Braskem will start operations of its new production capacity in Texas following a $675-million investment. The Charleston hub will support up to 204,000 tonnes of shipments.

The Charleston new hub is the result of a five-year accord between Braskem and Frontier Logistics. The Brazilian company, Latin America’s biggest petrochemical producer, will also keep its Houston export hub.

“We expect a significant increase” in cargo shipments resulting from Braskem’s decision, said by telephone during a June interview Jim Newsome, CEO of the South Carolina Ports Authority.

The new export hub will provide “packaging, warehousing and export shipping services to support Braskem's U.S. polypropylene (PP) production,” a spokesperson at Sao Paulo-based Braskem separately said by email.

Port Charleston set to see more cargo

Braskem’s decision will play a big role in consolidating efforts to attract more resin from shippers that want to diversify their supply chain risk out of the U.S. Gulf Coast, Newsome said.

“They quoted a volume of 204,000 tonnes and that’s about 1,000 containers a year so that’s really significant,” he added.

Private companies have readied several facilities to handle the resin coming by rail and prepare it for ocean shipping in bulk or in bags.

Frontier Logistics and the A&R Logistics facilities coming online will have 25,000 containers each a year capacity.

When including other efforts like those by A&R Bulk-Pak and Mid-States Packaging total capacity in Charleston for plastic resins shipment would reach 75,000 containers per year.

Efforts to start planning to add capacity to ship from the southeast begun right after plans to expand resin production in the U.S. Gulf Coast were announced early in the past decade. This followed a surge in shale gas availability from deposits like Eagle Ford, Barnett and Haynesville in Texas that led to decisions to add value to the gas liquids.

Reports in the past decade projected a resin production increase of about 10 million tonnes between 2018 and 2023, or from about 13 million up to 23 million tonnes, Newsome said.

“So, out of the 10 million, we think two million of that is coming to the Southeast,” Newsome added.

About 10% of Port Charleston export volume is chemical related. This includes not just resin but all types of chemicals.

Diversifying supply-chain risk

“CP Chem (Chevron Phillips Chemical) was really the first company to decide that they needed to diversify their supply chain,” Newsome said. “So between CP Chem and Braskem I think that would make a very good utilization in the Frontier (Logistics) facility,” he added.

In addition to petrochemical producers, there are several traders involved that also ship resin abroad concentrating on the smaller markets producers may prefer not to handle directly, he said. 

As for the resin cargo shipped from Charleston, the destination “is a fair mixture between Asia and Europe, a little bit Latin America.”

“We shipped last year, just pure resin, in the range of 15,000 containers. That’s comprised of about 70% in sea bulk and 30% in bagging operations,” he said.

Charleston and Savannah have in recent years increasingly captured volumes of export shipments of resin produced mainly in the U.S. Gulf Coast in parallel efforts with similar success.

Savannah advances with port deepening

Like Charleston, Port of Savannah has also seen an increase of resin export facilities. The port is working to accommodate more cargo.

The Georgia Ports Authority reported in late May that works to deepen and widen the port access are 62% complete with four dredges working simultaneously in the expansion project executed by the U.S. Army Corps of Engineers.

Meantime, companies working to help accommodate more resin exports from Savannah include A&R Logistics and Plastic Express.

Daniel Hibner, commander of the Corps’ Savannah District, has estimated the project will be ready by January 2022. Georgia and the federal government share the cost of the expansion.

The federal budget for fiscal year 2020 assigned $130 million to the expansion. Separately, nearly $29 million is going toward the Savannah River maintenance dredging.

Braskem’s new PP capacity coincides with weakened demand

The opening of Braskem’s new PP production line in Texas will coincide with a reduction in demand largely as the Covid-19 pandemic has hit the automotive industry.

Braskem said in late May along with its first quarter earnings that the Covid-19 pandemic’s impact in its U.S. operations was “a reduction in polypropylene production to about 85% of total capacity, which is 1.6 million tons/year.”

Braskem has three PP plants in Texas, one in Pennsylvania and a fifth in West Virginia, the company said in 2017 as it announced the construction of the additional capacity coming online in Texas. 

Up to 1,300 construction workers were involved in the La Porte, Texas project. The new line would require 50 permanent positions after startup, originally anticipated for the first half of 2020.

The planned investment for the construction of the new PP facility, which is near the Houston metropolitan area, was $675 million. 

The company said in late May that construction as of the end of the first quarter was 98.4% complete, with total investment as of the end of March at $634 million.

Braskem is majority owned by Brazilian construction company Odebrecht and state oil company Petrobras.

By Renzo Pipoli