Olin chlor-alkali production rates to drop in Q1

29 January 2008 23:45  [Source: ICIS news]

HOUSTON (ICIS news)--US chlor-alkali producer Olin said on Tuesday its plant operating rates would be in the low to mid 80s% of capacity in the first quarter, due to weak demand for chlorine from the downstream polyvinyl chloride (PVC) sector.

Although first-quarter production rates would be lower than the average fourth-quarter rate of 88%, overall volumes would be stable due to fewer plant outages, said John McIntosh, Olin’s President of chlor-alkali products. McIntosh made his comments during a conference call.

McIntosh said Olin had four plant outages scheduled for the first half of 2008, including two outages in the first quarter and two in the second quarter. That compares with seven plant outages during the fourth quarter of 2007.

Olin CEO Joseph Rupp said the company expects chlor-alkali earnings to increase as a result of a $75/DST (dry short ton) caustic-soda price hike that will be fully implemented in the first quarter of 2008.

The first $50/DST of the hike has already been implemented across most of the market, and many producers will push for an additional $25/DST price hike this quarter, Rupp said.  

“Looking forward, we believe our chlor-alkali business is well positioned to have a strong year in 2008,” Rupp said. “Demand for caustic soda is robust, and we are struggling to meet demand.”

Rupp said prices of chlorine, a co-product of caustic soda, have seen a downward trend as a result of weak demand for PVC. As such, overall chlor-alkali production rates have dropped.

“We have seen some weakness in demand from the vinyl industry beyond the typical seasonal slowdown,” Rupp said.

In the longer term, McIntosh said chlor-alkali supply and demand fundamentals would remain largely balanced over the next two years.

The only major expansion to US chlor-alkali production in the 2008-2009 period, McIntosh said, will occur when vinyl producer Shintech adds 300,000 tonnes/year of caustic-soda production capacity at its PVC and chlor-alkali complex in Plaquemine, Louisiana. The complex should begin operations in March.

Much of that increase will be offset by Occidental Chemical, which plans to remove 230,000 tonnes/year of caustic-soda production within a few weeks - when in converts its Taft chlor-alkali plant in Louisiana to potassium hydroxide production.

US caustic soda contracts settled in the $470-520/DST range for December, up $50/DST from November, according to global chemical market intelligence service ICIS pricing.

By: Greg Holt
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