INEOS targets €85/tonne hike for Q4 caustic soda contract

04 September 2009 20:59  [Source: ICIS news]

LONDON (ICIS news)--Northwest European major caustic soda producer INEOS ChlorVinyls has announced its intention to increase fourth-quarter contract prices by €85/tonne ($121/tonne), a source at the company confirmed on Friday.

“We will increase prices by €85/tonne as of 01 October, and for any customer looking for additional non-contract volume the increase will be effective immediately,” said the source.

In an official statement dated on Thursday, the company said that the increase “is in response to the shortage of supply as operational issues, both planned and unplanned, affect production and the supply chain”.

The company source said, “The industry is short on stocks as a whole, the outages are hitting both polyvinyl chloride (PVC) [the main end use for caustic soda’s co-product chlorine] and caustic soda making both markets tight. There is insufficient supply of both”.

The news came just days after the company announced an increase of $125/tonne on all of its new caustic soda export business, effective from 01 September.

While the increases on the spot market were already showing signs of being accepted, quarterly contract buyers appeared reluctant to agree to such increases, with a range of plus €50/tonne heard from one.

 The cyclical relationship of chlorine and caustic soda (produced in a ratio of 1 tonne chlorine to 1:1 tonne caustic soda) must be balanced, which generally creates a trend of one product in short supply and thus, rising prices, while the other sustains losses and lower demand.

However, the numerous ongoing chlor-alkali maintenance outages, coupled with low chlorine output, has resulted in increases seen in both the caustic soda and PVC [the main end application of chlorine] markets.

“It is not unique but it is quite rare for both to increase at the same time,” concluded a producer.

($1 = €0.70)

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By: Stephanie Wilson
+44 20 8652 3214

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