FocusEurope HCl remains tight on continued cutbacks

24 April 2009 17:20  [Source: ICIS news]

By Rebecca Clarke

LONDON (ICIS news)--Little short term relief is seen for the uncharacteristically tight European hydrochloric acid (HCl) market on continued cutbacks in isocyanate production and expectations that chlorine derivative output may be further curtailed in the coming months, market sources said on Friday.

“The market is still tight and it will get worse,” said one producer.

“Caustic looks like its down €100-150/tonne [$131-197/tonne] [for the second quarter] and chlorine is likely to be pulled back, reducing the amount of polyvinyl chloride (PVC) that will be made. Methyl di-phenylene isocyanate (MDI) and toluene diisocyanate (TDI) are still at low rates too,” he added.

As a by-product of isocyanate and chlorine derivative production, HCl has been hit by cutbacks in production in the face of weak downstream demand from the automotive and construction industries.

Some sources estimated that European isocyanate production was currently running at a reduction of 20-30%.

Additionally, one supplier taking by-product acid from potassium sulphate (SOP) production has suffered at the hands of the weak fertilizer market, which was also showing no signs of improvement.

At the same time as running at reduced rates, planned spring maintenance programmes and unexpected shutdowns were further curtailing HCl supplies.

“In a market that is normally balanced to long, the spring maintenance programmes usually come as a relief, but not this year,” said one supply source.

Unplanned shutdowns were also wreaking havoc in an already finely balanced market, with producers unable to build up stock levels to protect themselves against such eventualities.

One major northwest European HCl producer was forced to declare force majeure on deliveries of 33% acid ten days ago after suffering an unplanned outage and having no stocks at its disposal.

Deliveries are still being made, but at much reduced rates and the restrictions were expected to continue into next week.

Other suppliers also had customers on allocation as they tried to manage their low availability.

Producers lamented the inability to plan their availability, with supply levels changing week to week.

The buy side was also suffering. Although demand levels have dropped off, particularly from the steel, galvanising, oil and gas sectors, supply levels have decreased at a much faster rate.

Demand from the food, pharmaceutical and water treatment sectors was still running at normal levels, largely unaffected by the economic slowdown.

“We have big problems sourcing acid,” said one customer in the food sector, noting that those buyers with a number of supply sources were faring better than others.

($1 = €0.76)

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By: Rebecca Clarke
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