18 January 2012 17:12 [Source: ICIS news]
LONDON (ICIS)--Initial northwest European caustic soda contract prices for the first quarter of 2012 have settled with an average increase of €30/dry metric tonne ($38/dmt) on market tightness, market players said on Wednesday.
Despite hike announcements of €50-60/dmt at the end of December/beginning of January, producers have had to accept smaller increases, as softening demand in the key downstream markets for aluminium and pulp and paper has balanced out the caustic soda market and given buyers stronger bargaining power in price negotiations.
“The market was saturated and not willing to accept increases as great as those announced by some players,” a producer said.
A wider range of €20-40/dmt was heard, as the extent of increases have depended on the region and each individual customer.
Those contracts closer to €500/dmt are likely to see increases of €20/tonne, a producer said.
“It depends on the price level you start from. If a contract is at €450/dmt then it is hard to get an extra €40/dmt, but if it’s €410/dmt, then it is easier,” the producer added.
Some large buyers have succeeded in fixing their first-quarter contracts with a smaller increase of €20/dmt from the previous quarter.
Also, increases have been more or less successful depending on the region. According to a producer, it has been easier to implement increases in northern France and the Benelux (?xml:namespace>
More resistance has been found in Germany, which is the biggest European market for caustic soda, with more players involved and greater competition, the producer added.
In the Mediterranean, tight conditions could lead to stronger increases, players said, but negotiations are still ongoing and are not expected to settle until the end of the month.
Overall, initial settlements have fallen short of the €50-70/dmt hikes announced by producers such Dow Chemical, INEOS ChlorVinyls, Arkema, Vinnolit and Bayer, but greater than what buyers were hoping for.
The market remains fairly tight, as availability continues to be dictated by low chlorine offtake, which at the same time depends on polyvinyl chloride (PVC) operating rates, which remain at 70-80% across the European market.
($1 = €0.79)
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