Sodium Chlorate Market Stabilizes As Supply Comes Into Balance

12 August 2002 00:00  [Source: ICB Americas]

The North American sodium chlorate industry is generally balanced, keeping prices for the product fairly steady. Pulp mill capacity that had been curtailed during the first quarter has been brought back up, and excess inventories are steadily being depleted. Sources say the industry is prepared to absorb the roughly 100,000 tons in annual capacity that have come on stream in the sodium chlorate market this year. Operating rates have moved up slightly to the 89 to mid-90s range, from the 85 to 87 percent range during the first half of this year.

Pricing for sodium chlorate has been stable to flat, though one producer reports, "there has been a bit of slippage in pricing." Contract pricing, which was in the $390 to $450 per ton range during the first quarter, has slipped to the $360 to $440 per ton range, the source says.

There has been a price increase by one producer in the sodium chlorate market this year. During its fiscal second quarter, Sterling Pulp Chemicals says it has seen prices rise by 6 percent. The last industry-wide increase, for $25 per ton, was implemented in July 2001 and was successful, sources say.

Producers note that price increases implemented during 2000 and 2001 were the result of increased energy costs, but that those costs have moderated this year. "Since energy costs have stabilized, we have not attempted any increases. However, there have been a few small price increases in the pulp industry this year," says one producer.

"There have been no increases this summer, but most contracts are done quarterly, with some contracts coming on October 1," states an official at FinnChem USA Inc. (formerly Huron Tech Corp). Another factor deterring producers from attempting an increase "is that we've had increased capacity in the market, and that has limited the ability of the implementation of another increase," he notes.

Demand for sodium chlorate has improved during the third quarter. "July has been the biggest month of the year so far. The mills have been either running full out or close to it," says Drew Cochrane, director of marketing, Eka Chemicals Canada Inc. "The first quarter was very good for chlorate, although the second quarter was rather slow."

"The second half of 2002 is expected to be slightly better than the first half, and it will also show better demand than the second half of last year," says the FinnChem official. "Mill conversions [to elemental chlorine-free (ECF) bleaching] have affected the demand for chlorate over the last three years. Some mills went early, some waited as late as last December. The mill that changed in December increased its consumption by 8,000 tons on an annual basis."

North American and Scandinavian (Norscan) wood pulp inventory levels have shown steady declines in the second quarter. Analysts have forecasted May levels to be roughly 1.41 million metric tons, compared to 1.51 million in April. April stock levels for Norscan producers already showed a 10.7 percent decline of 184,000 from March's level of 1.69 million tons.

"There are also less pulp mills now than there were two years ago. Over the last year or so, several pulp mills have shut down," says Paul S. Timmons, president, Sterling Pulp Chemicals.

On the supply side of the market, there have been several substantial capacity shifts this year, particularly during the first quarter. One large increase in capacity during the quarter was Albchem Industries Ltd.'s new 40,000-ton-per-year plant near Hargrove, Manitoba, Canada. Albchem says the facility became operational during the first quarter and was built to meet growing customer demand. The Hargrove site is located near a large salt deposit and draws its electricity from Manitoba's rich hydro-energy base.

Nexen Chemicals Canada Limited Partnership expanded its Brandon, Manitoba, sodium chlorate plant by 70,000 metric annual tons during the first quarter, roughly two quarters ahead of schedule.

However, the sodium chlorate industry is undergoing seasonal capacity curtailments, which started at the onset of the warm weather, according to Mr. Timmons. For example, roughly 5 to 6 percent of total capacity is being idled at Sterling.

There have also been some large capacity curtailments, such as Nexen's curtailing of 50,000 annual metric tons of capacity at its Taft, La., facility during the first quarter. Last month, Georgia Gulf Corp. indefinitely idled its roughly 24,000-ton-per-year facility at Plaquemine, La.

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