FocusEurope caustic soda tight into 2008

30 November 2007 16:14  [Source: ICIS news]

By Adal Rafiq

 

LONDON (ICIS news)--The European caustic soda market looked set to remain tight for the rest of 2007 and well into next year as a series of producers announced plans for major price hikes this week.

 

Three major northwest European sellers said they would be looking for hikes of €50/DMT (dry metric tonne), two effective from 1 December and one from 1 January.

 

Further announcements from others looked likely.

 

"No one will miss this chance", said one seller, adding that it was simply a question of time for sellers to decide whether to go for December or January increases.

 

"Prices are going up all over the globe, so to raise them in Europe as well is just a no brainer," added the source.

 

Northwest European (NWE) spot prices were last assessed in a $310-320/DMT range on a FOB (free on board) basis, according to global chemical intelligence service ICIS pricing.

 

In the Mediterranean region, prices were assessed at $330-340/DMT FOB.

 

The reasons given were wide ranging; an apparent downturn in the world market, the increasingly tight supply and demand situation -- both globally and domestically -- ongoing low inventories and rising energy and transport costs.

 

Another reason cited by one source was the mounting likelihood of significant upward movements on the bi-monthly ethylene contract.

 

According to the source, domestic PVC prices would have to increase by at least half of the bi-monthly ethylene increase.

 

At the time of press sources speculated over an unconfirmed report of a settlement up €65/tonne, taking the November-December contract to €1,010/tonne FD NWE.

 

This provided the foundations for yet another reason to raise prices domestically.

 

Since PVC increases were unlikely under the conditions of a traditionally slow December, compensation would be sought from caustic soda to maintain a reasonable overall profit. This would place further pressure on first quarter pricing.

 

There was some confidence that the increases would be accepted by the market.

 

"There has been a tremendous pull for material across the Atlantic", said one seller.

 

US operating rates were described as dwindling by the source, on the back of slowing polyvinyl chloride (PVC) demand.

 

"This was the only reason which could explain the rising interest from the US", added the source.

 

Few producers had any spare product to meet this demand, however, and most preferred to service local requirements.

 

At least two reported being on 80% allocations and the need for increasing inventories was widespread.

 

"There is practically nothing available for the spot market" said another source.

 

Producers also appeared reluctant to engage in swap deals, with little guarantee that supply would improve enough at any stage in the near future to meet the resulting obligations.

 

Small parcels were occasionally on offer, some sellers said, but prices were prohibitive.

 

The announcements reinforced statements by producers earlier in the year that this would be a challenge, certainly for the remainder of 2007 and well into the first quarter of 2008.

 

"There was still a mountain to climb", said one.

By: Adal Rafiq
+44 20 8652 3214

< previous article(ICIS Chemical Business podcast November 2, 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly