FocusAsia caustic soda falls 20% due to weak demand

16 March 2009 04:51  [Source: ICIS news]

By Ng Hun Wei

SINGAPORE (ICIS news)--Asian caustic soda values have plunged by more than 20% last week on poor demand but some producers said on Monday the slide was likely to slow down because the prices were nearing production cost.

Prices of caustic soda exports were assessed at $220-250/dmt (dry metric tonne) (€169.4-192.5/dmt) FOB (free on board) northeast (NE) Asia last Friday, more than $60/dmt drop from levels reported the previous week, according to global chemical market intelligence service ICIS pricing.

Within two weeks, sellers have slashed their offers from over $300/dmt FOB NE Asia to just $250/dmt FOB NE Asia, but were still struggling to close deals, market sources said. A cargo traded at $230-235/tonne FOB China was the only transaction reported last week, they added.

“Most producers have not been quoting any offers and are willing to accept any reasonable bids. Sellers are struggling to find the bottom of a rapidly declining market,” a trader said.

On the other hand, buyers were holding back purchases in anticipation of further price reduction of downstream petrochemical products due to weak demand and some expected Asia caustic soda values to touch $200-210/tonne FOB NE Asia.

Caustic soda demand from downstream paper and pulp, alumina and textiles sectors has petered out as major economies have sunk into recession and consumer spending was declining, industry sources said.

Demand from the US, which had been the key price driver for Asia caustic soda in the past year, has already plunged by around 25% year-on-year in January and February according to traders’ estimates.

Competition in the export market had also stiffened significantly since late last year as Chinese, Japanese and Koreans chlor-alkali producers also entered the fray due to declining domestic demand.

However, the current caustic soda prices were now so close to, or below their production costs, that some chlor-alkali producers were expecting the fall to stop.

“This could arrest or at least slow down the slide in caustic soda prices,” one producer said.

( $1 = €0.77)

For more on caustic soda visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect 

By: Ng Hun Wei
+65 6780 4359

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