North American chlor-alkali recovery to remain slow - Fitch

09 November 2010 05:05  [Source: ICIS news]

HOUSTON (ICIS)--The North American chlor-alkali industry will experience slow and limited recovery from the recession next year, but could rebound faster if it capitalises on growth in emerging markets, a new Fitch Ratings report said on Monday.

Long-term growth rates for the North American chlor-alkali industry were expected to “grow at a low single-digit rate over the long term, given the expected slowing recovery in key end-user markets for chlorine and caustic soda, such as intermediates for the chemicals industry, as well as construction, pulp and paper, alumina, water, detergent, textiles, and packaging, beyond 2010”, the report said.

North American chlorine production fell by almost 12% to about 8.5m tonnes in 2009 from the previous year, while production of the byproduct caustic soda dropped by 11% to 6.6m tonnes, according to the report.

Chlor-alkali operating rates fell to 50-60% during the recession and some chlor-alkali producers idled or permanently shut down their capacities, the report said.

Operating rates have since increased to more than 85% in the first half of 2010 and have risen even further to 93% in August, as prices stabilised and demand strengthened, the report said.

“Beyond 2010, Fitch anticipates that growth in developed markets will remain mature, while emerging markets will continue to drive global growth for chlor-alkali products,” the report said.

“In North America, key end-user markets for chlor-alkali products are expected to continue their rebound from troughs mostly reached in 2009,” the report continued.

“The recovery, however, remains slow and the overall value of sales into industrial and consumer markets is likely to remain below pre-recession levels,” it said.

Construction drives demand for chlor-alkali products and US construction expenditures in the US were expected to reach $863bn (€613bn) in 2011, compared with a peak of nearly $1,167bn reached in 2006.

Construction end-uses of polyvinyl chloride (PVC) resin and PVC products include pipes, wire and cable coatings, window and door frames and outdoor furniture.

However, North American producers could achieve faster growth if they are able to take advantage of growth in emerging markets, the report said.

“Notably, China has tripled its chlorine demand to 33% of the global market since 2000,” the report said.

“However, China has also ramped up its capacity to [25m tonnes], or 34% of the global capacity,” the report added

China was expected to add a further 2m tonnes of chlorine capacity in 2010 and 2011, and exports of downstream products increasingly compete with North American production, the report said.

($1 = €0.71)

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By: Brian Ford
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