FocusEurope Q2 caustic up €30-40/tonne

18 April 2008 13:59  [Source: ICIS news]

LONDON (ICIS news)--European second-quarter caustic soda contracts were largely settled up €30-40/tonne ($48-63/tonne) on tightening supply and strong demand, buyers and sellers said on Friday.

According to seller sources, negotiations were all but over and there was a sense of satisfaction at the outcome. “We didn’t get all we asked for,” said one producer. “But overall we ended negotiations up around €30/tonne ($48/tonne), even €50/tonne sometimes”.

“The situation is better than Q1 [first quarter],” said one seller in Germany, adding that “everyone recognises that demand is strong for all applications, while product is extremely tight”.

One producer said it was “sufficiently short to adopt a take it or leave it position”, lifting prices in the UK by £30/tonne ($60/tonne) and €45/tonne on the continent.

A number of buyers confirmed higher prices, of up to plus €30/tonne.

“This quarter has been quite different to the last couple,” said one buyer. “Previously, sellers would come out talking big increases, but in the end it would settle at a rollover, plus or minus a few euros, but this time, all the producers are pretty firm.”

On the subject of tight supply in the market, the buyer added that it seemed clear from the official statistics, but he “had not felt the situation himself yet”.

No official figures for March have been released by the industry association, Eurochlor, but sources expected inventories levels to remain low and approaching the maintenance season. Stock figures were expected next week.

Akzo Nobel began a three-week long maintenance turnaround at its 715,000 tonne/year chlor-alkali plant at Botlek in the Netherlands on 4 April.

German producer Vinnolit has also planned to shut down its 350,000 tonne/year plant at Knapsack for a maintenance turnaround that would go on from the last three days of May till 5 June.

Following this, Vinnolit would shut down its 90,000 tonne/year plant at Gendorf, ahead of a plant conversion from mercury to membrane-based production.

Demand from across the Atlantic posed another conundrum for the European market.

“There is a strong demand for exports to the US and Latin America, so traders are looking to source more product for May and June,” one seller said.

According to some European sources, another significant hike was being mulled over by sellers in the US, which could apply further pressure on the European export market.

Supply to fulfil any export demand was difficult to find, however. A number of producers were reported to be on strict allocations, a situation which they expected to continue for the coming months.

Spot business has also become increasingly rare, last assessed at $430-440/DMT (dry metric tonne) on a free on board (FOB) northwest Europe (NWE) basis by global chemical market intelligence service ICIS pricing. Higher numbers had been talked increasingly, but so far there had been little confirmation.

The downstream pipe grade polyvinyl chloride (PVC) market continued to display the weak demand and long supply which has held back producers ambitions through the first quarter.

Other sectors, however, such as paste PVC were still performing well; with producers saying they were able to recover the costs of higher ethylene contracts. This was a source of relief for some chlor-alkali producers as fears continued that PVC production rates could be reduced in the face of waning demand.

So far, despite talk of high PVC inventories and weak demand, no rate reductions have been seen. Some sources have previously said that caustic soda was fast becoming the main driver for the chlor-alkali market.

With margins for pipe-grade PVC under severe pressure, rising caustic soda prices, both domestically and for export, were the only source of relief.

“EDC [ethylene dichloride] is not being produced to make PVC at the moment, because the market is oversupplied," said one producer. "It is just to keep the chlorine units running. If it was not for this, then chlorine would slow down, and we would have an even tighter caustic market.”.

For ECU (electro-chemical unit) producers, this could be a major issue. “This will be the big challenge us producers. Trying to reduce our PVC stocks without making caustic soda even tighter than it already is,” said one producer.

($1 = €0.63)

By: Adal Rafiq
+44 20 8652 3214

< previous article(VIDEO - ICIS news Asia Lunchtime Bulletin 29 October 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