Belgium's Solvay hopes to retain pricing power as output recovers

28 July 2011 17:25  [Source: ICIS news]

LONDON (ICIS)--Solvay remains confident of holding onto pricing power in its major markets in the third quarter as it seeks to lift margins against still high feedstock and energy prices, company executives indicated on Thursday.

The chemicals, speciality polymers and vinyls producer expects operating rates overall in chemicals and plastics to increase in 2011 compared with 2010. It is sold out in some specialty polymer lines.

Different term contracts, some of which are agreed on an annual or even a multi-year basis, are proving to be a buffer against margin volatility.

“We don’t feel that there is a resistance to price increases,” the head of Solvay’s plastics sector, Jacques van Rijckevorsel, said in a conference call as he commented on the position in Solvay’s broad-based speciality polymers segment. Some new price increases are being pushed through in July, he added.

Polyvinyl chloride (PVC) prices were under pressure from some customers in June and July, following the fall in the monthly ethylene contract price, he said, but sentiment had improved with the ethylene increase for August. Solvay has pushed for a price increase for August which some customers have accepted.

Soda ash prices remain flat for the time being, although Solvay continues to benefit from annual contract prices agreed at the start of the year, head of chemicals Vincent De Cuyper said. Caustic soda prices in Europe were agreed for the third quarter at a rollover from the second quarter level of €400/tonne, he added. De Cuyper sees some pressure on the caustic soda spot price in China.

Solvay was among the many chemical companies that benefited from higher prices in the second quarter as producers sought to cover increased feedstock and energy costs.

The Belgium-based firm, which is bidding for control of France-headquartered specialties maker Rhodia, said on Thursday that 11% higher prices in the quarter had compensated for higher energy costs while 4% higher volumes reflected “sustained overall global activity”.

It reported a sales increase of 12% year on year to €1.72bn ($2.46bn) for the quarter and a net profit of €111m from €44m a year earlier.

“The second quarter of 2011 has been excellent," CFO Bernard de Laguiche said during the conference call. Margins in plastics are currently above pre-crisis levels and chemicals margins close to their earlier levels, he added.

($1 = €0.70)

For more on Solvay visit ICIS Company Intelligence

By: Nigel Davis
+44 20 8652 3214

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