25 February 2002 00:00 [Source: ICB Americas]The chloralkali market is showing some positive signs of recovery, but also some other indicators of weakness. Chlorine has strengthened during the first quarter, and at least one major producer this month has implemented a price increase. However, caustic soda demand remains weak, and caustic pricing continues to deteriorate.
According to one chloralkali producer, signs that chlorine has strengthened in recent weeks include the considerable rise in ethylene dichloride (EDC) values, and some "apparent improvement in demand" in the non-vinyls segment.
"Demand for chlorine is higher now than in the third and fourth quarters of last year. And operating rates are a bit higher than last year," says Steve Brien, director, chloralkali and vinyls studies, Chemical Market Associates, Inc. (CMAI). Sources say operating rates are generally in the 88 to 90 percent range.
Mr. Brien also says that demand for chlorine "typically follows the economy, and the leading indicator of the economy is demand for polyvinyl chloride, which has picked up this quarter. So, that means the economy could recover by mid-year." Some sources say that the chlorine market has improved because of some "re-buying" during January and February, when inventories are low.
In an unusual situation, spot caustic soda and spot chlorine are pricing in the same range, at $90 to $100 per short ton, according to the CMAI. Contract caustic is roughly $140 to $160 per short ton, and contract chlorine is about $70 per short ton (chemicals average).
Chlorine has had little price movement over the last few months, and an increase implemented last year was met with mixed industry results. However, at least one major producer, Olin Corp., implemented an increase this month, which Mr. Brien says seems "very attainable." Effective immediately, Olin has implemented a $30 per ton (in Canada, C$48 per metric ton) increase, as contracts permit. "I feel positive that this $30 increase will be fully attained because of the state of the industry and where caustic soda is. And I'm surprised the increase was not higher," says Mr. Brien.
However, while the demand for chlorine has picked up, caustic is not yet there, Mr. Brien says. One producer says that the largest factor affecting the industry right now is the lack of demand for caustic. "The industry has been operating at incredibly low rates, yet caustic is still long. It's long to the point where it could prevent companies from raising rates substantially as chlorine demand improves. Chlorine buyers could be in a very tough situation," he says.
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