Dow Puts Caustic Soda on Order Control

04 November 2002 00:00  [Source: ICB Americas]

Dow Chemical Company last week instituted a 100 percent order control program for all grades of caustic soda until further notice. The market has tightened because a "substantial amount" of chloralkali capacity has been taken out of production for turnarounds during the fourth quarter, says Rob Broomham, ECU Management at Dow.

Dow plans to have idled at least 2 million tons of chloralkali capacity during the quarter. The company's 370,000 ton-per-year plant at Plaquemine, La., was idled on November 1; a 30-day turnaround during October was taken on about half of the capacity at its 4 million ton-per-year plant in Freeport, Tex.; and one small unit at Fort Sas-katchewan, Canada, will be idled at the end of this year. "With that amount of capacity idled, we want to be sure that we meet the needs of our contractual customers," Mr. Broomham says. "We are also aware that two or three other [producers] have announced order controls, so we may see some additional customers coming to us."

Dow also announced a price increase for all grades of caustic soda of $70 per dry short ton, basis 76 percent Na20, effective immediately or as contracts permit. At least one other producer, Olin Corp., has announced a similar increase.

The $70 increase is on top of two $50 per ton increases that Dow and others announced on October 1 and on July 1, for a total of $170 in price hikes over the last six months, but Mr. Broomham says that the $70 increase is in line with supply and demand fundamentals. "We're seeing improvements in caustic soda demand, such as in exports and alumina, compared to last year," he notes.

On the supply-side, he says that the trend in early-to-mid-2002, in which supply exceeded demand, has reversed itself. "In midyear, there was a rationalization in chloralkali capacity. There has been a decline in production for seasonal end use during the fourth quarter. More supply reduction on caustic is taking place today, and caustic is likely to get tighter in the future." A factor contributing to the increase has been the rising cost of natural gas over the last several months to about $4 per million Btus, states Mr. Broomham.

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