09 December 2008 23:42 [Source: ICIS news]
HOUSTON (ICIS news)--Major production cutbacks at US chlor-alkali plants will keep caustic soda supplies tight despite weakening demand, a producer said on Tuesday.
US chlor-alkali production statistics for November are still being compiled, production rates for November and December could be so low that they come as a shock to some market participants, the producer said.
“Nobody can deny caustic demand is going down; however, the feeling is that chlorine [demand] is going down much faster,” the producer said.
Chlorine and caustic soda are produced simultaneously in the same manufacturing process, but chlorine demand typically has a greater influence on production rates because it is a corrosive, toxic gas that is dangerous to store.
Weak demand for downstream polyvinyl chloride (PVC) has limited chlorine production since around the start of the US housing crisis (home construction is a major consumer of vinyl materials), but other chlorine-derived chemicals have seen a fall-off in demand more recently as the economy slides into recession, the producer said.
Although some buyers had expressed hope that weakening caustic soda demand would bring down record-high US contract prices, the producer said that declining production and fewer imports from Asia would keep demand ahead of available supply in the near future.
On 1 December, China’s Shanghai Chlor-Alkali - a major exporter of caustic soda to the US - shut down a 540,000 tonne/year caustic soda plant indefinitely when a major client took its own plant offline.
US caustic soda contract prices for October were assessed at $1,075-1,145/dst (dry short ton) FOB (free on board), according to global chemical market intelligence service ICIS pricing.
US caustic soda producers include Dow Chemical, Occidental Chemical, Olin, PPG Industries, Shintech, Bayer, Georgia Gulf and Formosa Plastics.
($1 = €0.77)
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