OxyChem nominates $275/dmt US caustic soda hike

28 October 2008 23:12  [Source: ICIS news]

HOUSTON (ICIS news)--US caustic soda producer Occidental Chemical (OxyChem) has announced a $275/dst (dry short ton) price hike effective immediately for buyers without 30-day price protection and late November for buyers with protection, a source close to the company said on Tuesday.

Producer PPG Industries also similarly announced a $100/dst (€73/dry metric tonne) contract price hike this week, market sources said.

OxyChem and PPG did not immediately respond to calls by ICIS news. 

October contract prices were assessed at $1,075-1,145/dst FOB (free on board), according to global chemical market intelligence service ICIS pricing.

Managers at OxyChem believe US chlor-alkali production rates will fall below 80% of capacity for November and December and possibly longer due to weakening global demand for polyvinyl chloride (PVC), a major end-product of chlorine, the co-product of caustic soda, a source close to the company said.

“We are seeing worldwide demand for vinyls soften very quickly, and that will drive down chlor-alkali production,” the source said.

However, another US caustic soda producer said it will not follow OxyChem and PPG’s proposed price hikes and criticised those companies for ignoring the growing arbitrage opportunity in the US for lower-priced Asian caustic soda exports.

“I think it’s ridiculous. The [US] spot price is already below the contract price, and this would expand that gap,” the producer said.

The US domestic spot price averaged $990/dst FOB US Gulf last week, while the export spot price averaged $980/dmt (dry metric tonne) same basis, according to ICIS pricing.

Nevertheless, the source close to OxyChem said the company views Asian caustic soda exports to the US as essential to helping supply buyers that would otherwise not be supplied going forward due to low domestic production rates.

“In the short term that product is sorely needed. It would take a lot of ships coming over the Pacific to even put a dent in US demand,” the source said.

Occidental Petroleum reported on Tuesday a 3.3% year-on-year profit increase in its OxyChem chemicals segment, to $219m, primarily due to higher caustic soda margins.

US caustic soda producers include OxyChem, PPG Industries, Dow Chemical, Georgia Gulf, Shintech, Bayer, Olin, and Formosa Plastics.

($1 = €0.80)

For more on caustic soda, visit ICIS chemical intelligence
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For more on OxyChem visit ICIS company intelligence

By: Greg Holt
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