INSIGHT: Caustic soda buyers, sellers battle on price hike initiatives

18 March 2011 18:32  [Source: ICIS news]

By Ruth Liao

HOUSTON (ICIS)--A clash between caustic soda buyers and sellers on price increase initiatives is playing out in the US.

Several price increase initiatives have been announced by suppliers, but buyers are sceptical that they will take hold.

Producers say a relatively-healthy export ­market and demand for chlorine derivatives will support price hikes. However, buyers say the market is likely to lengthen because of additional capacity - which is expected by the second half of the year - and temperate domestic demand. 

The first announcement emerged last December, with one major producer out at $35/dry metric tonne (€25/dmt), sought in the spot and export markets as contracts allowed. At least four other producers followed with $40/dmt price increases over the next few weeks into January.

One buyer characterised the increases as "disorganised". Another said it was apparent the increases were an effort to keep prices from eroding against a lengthening market. 

Producers believe otherwise, saying that domestic demand is relatively stable and that the caustic export market continues to be active.

Appetite remains healthy for chlorine-derivative material from the US, particularly key upstream product polyvinyl chloride (PVC), to markets such as Asia, one chlor-alkali producer said.

US ethylene prices, compared with Asia feedstocks, continue to be at an advantage because the US has cheaper production costs, the producer said.

Another producer asserted US supply was tight, particularly on the east coast, because of limited availability from European producers, therefore tightening the US Gulf market.

Two major chlor-alkali producers are expected to bring new material on stream this year, according to one market source.

By 1 July, Formosa's expansion in Point Comfort, Texas, will be on stream. A company source said the expansion will provide 25% more caustic soda, or about 230,000 dst/year.

The second phase of  Shintech's chlor-alkali project in Plaquemine, Louisiana, was finished in December, completing the project's first plant and bringing 600,000 metric tonnes/year of PVC and 580,000 metric tonnes/year of caustic soda on stream, according to a company source.

Globally, caustic soda capacity is expected to increase by about 5.2m tonnes/year in 2011 with 73% of that - 3.8m tonnes/year - stemming from new production in northeast Asia, according to a senior industry executive at the 5th International Chlor-Alkali and Vinyls Conference held March 9-10 in Taipei.

US chlor-alkali producers were running at 92% of capacity in January, up by 7 percentage points from December, according The Chlorine Institute.

January chlor-alkali output was 1.049m tons (951,778 tonnes) of chlorine and 1,105m tons of caustic soda, according to the The Chlorine Institute.

December's operating rate was 85%.

US caustic soda export prices were assessed at $345-380/dmt by ICIS

US chlor-alkali producers include Dow Chemical, Occidental Chemical, Formosa Plastics, Shintech, Georgia Gulf, Olin and PPG Industries.

($1 = €0.71)

By: Ruth Liao
+1 713 525 2637

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