Brazil producers increase caustic soda prices 24%

06 March 2008 22:22  [Source: ICIS news]

HOUSTON (ICIS news)--Caustic soda producers in Brazil increased local prices by 24% on average this week amid an increasingly desperate supply crisis, market sources said on Thursday.

Domestic caustic soda prices in Brazil settled in the $700-780/DMT ex-tank range this week, up from $580-610/DMT during the week prior to the 1 March price hike, according to global chemical market intelligence service ICIS pricing.

The increase was substantially more than local producer Braskem’s price hike nomination of $90/DMT from mid-February, but a source close to the company said supply conditions have tightened further in recent weeks.

Brazil’s fast-growing alumina and pulp-and-paper industries cause its overall consumption of caustic soda to far outpace what is produced domestically.

In order to maintain high production levels, Brazil’s buyers have grown increasingly dependent on caustic soda imports from major producers in the US and China, sources said.

Yet to the dismay of buyers, imports have slowed to a trickle this quarter, and Brazil’s producers have been quick to take advantage of the shortage by raising prices.

“The price is strengthening mainly because of tight supply all over the world,” one producer said.

Sources said import prices this week jumped to $570-630/DMT CFR, an 11% increase over last week’s assessment, according to ICIS pricing.

In the US, producers have limited production due to weak demand for caustic soda’s co-product, chlorine. New home construction is a major consumer of downstream polyvinyl chloride (PVC), but demand for vinyl construction materials has been in a slump ever since the domestic housing market hit a financial crisis.

Meanwhile, in China, chlor-alkali production has been limited by an electricity shortage, and government officials have enacted policies to dissuade producers from exporting caustic soda.

Brazilian caustic soda producers include Carbocloro, Braskem, Solvay, PanAmerica, Dow, Aracruz, and Canexus.

For more on caustic soda visit ICIS chemical intelligence

By: Greg Holt
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