US Olin braces for softer Q3 demand on customer outages, vinyls

22 July 2011 18:06  [Source: ICIS news]

HOUSTON (ICIS)--US chlor-alkali producer Olin expects chlorine and caustic prices to remain firm through the third quarter, officials said on Friday during the company’s second-quarter earnings conference call.

Missouri-based Olin announced a second-quarter net income of $42.1m (29.5m), compared with $16.9m in the second quarter of 2010. Olin’s sales reached $529.1m, compared with $405.7m in the same time period a year ago.

But the company is bracing for softer demand in the third quarter because of anticipated chlorine customer outages and weakened vinyls exports, said chairman and CEO Joseph Rupp.

“We expect pricing for chlor-alkali to continue to improve,” Rupp said. “While we have concerns for demand, we believe the business is in position for a strong 2011.”

Olin’s second-quarter chlor-alkali operating rates were at 85%, having been affected by a 14-day turnaround at the company’s McIntosh, Alabama, facility in the beginning of April.

Rupp said operating rates for the beginning of July were above 90%, and are expected to run at this level into August.

“The strength of the bleach business is contributing to the higher operating rate,” he said.

Two planned, multi-month outages by two chlorine customers beginning in July and September are expected to lower demand and operating rates by the end of the third quarter.

Rupp said one of the customers is shifting a planned outage from the fourth quarter to the third quarter, and the other outage is related to a capital investment.

Rupp said the recent announcement of Occidental Chemical's (OxyChem) plans to build a plant in Tennessee to supply DuPont’s titanium dioxide (TiO2) production does not affect Olin’s perspective on US caustic capacity.

“Over the long haul, there is still an industry bias toward reducing capacity, coupled with the fact that over the next five years, chlorine demand in North America will continue to grow,” he said.

Olin was one of two US caustic soda producers that recently announced a $25/dry short ton (dst) price increase. This was in addition to a $50/dst price hike pending in the market, according to market participants.

Rupp said tightness in the market - particularly for membrane-grade material rather than diaphragm-grade material - was a supporting factor for both increases, which would likely be implemented until later in the third quarter and fourth quarter.

Caustic soda, or sodium hydroxide, is the co-product of chlorine. Caustic soda is used in a variety of manufacturing applications, including pulp and paper processing, alumina refining and water treatment.

Olin also owns Winchester, a manufacturer of ammunition. Winchester’s second-quarter sales were $148.8m, compared with $147.7m in the second quarter of 2010.

Other major US caustic producers include Dow Chemical, Formosa Plastics, Shintech, Occidental Chemical, PPG Industries and Westlake.

($1 = €0.70)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
For more on Olin’s plants visit ICIS plants and projects
For more on chlor-alkalis visit ICIS chemical intelligence


By: Ruth Liao
+1 713 525 2637



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