28 March 2010 17:37 [Source: ICIS news]
By Judith Taylor
HOUSTON (ICIS news)--Concerns over a puzzling demand outlook will be a major discussion topic among chlor-alkali players converging in San Antonio, Texas, to attend the National Petrochemical & Refiners Association (NPRA) 2010 International Petrochemical Conference (IPC).
Wobbly US demand versus chlor-alkali operating rates attracted attention days ahead of the conference, as participants sought to weigh margin potentials against energy and feedstock costs in substantially different demand segments.
The main market for PVC is US construction and home building, which comprise over 60% of domestic demand for the resin.
Despite a tenuous recovery, US home-builder confidence fell due to credit issues and a home market flooded with foreclosures, according to the National Association of Home Builders (NAHB).
As one PVC buyer put it, “Unless the economy takes off, good luck.”
Caustic soda demand is largely taken up by alumina production, the wood-pulping process in paper production and uses found in the soap-making process.
Bottom-feeder price levels stalked caustic soda, which only recently showed nascent signs of recovering on the back of a $75/dst (dry short ton) (€56/dst) increase move that entered the market in September 2009 and seeped into full implementation in February and March.
Caustic soda’s demand segments are slightly less prone to the winter freeze-out, but also tend to drift during the fourth quarter.
Chlor-alkali operating rates see-sawed at the 70s and 80s percentiles to cope with weak US demand in the PVC segment and caustic soda oversupply stemming from high rates in 2008 versus the plummeting US economy.
January chlor-alkali operating rates were higher than many expected, hitting 85% of production capacity, up from 76% in December, according to The Chlorine Institute.
December is typically considered a low point in production because PVC demand is seasonally down as winter weather stalls the construction sector, including home building and municipal projects.
The February figures were not yet released by The Chlorine Institute, but there were expectations that these would again be at or about 85%.
Ahead of NPRA, some chlor-alkali players were encouraged by promising January vinyls, alumina and paper performances, but others were sceptical.
Almost everyone agrees, “It’s all about the economy”.
($1 = €0.75)
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