08 March 2012 18:20 [Source: ICIS news]
By Abache Abreu
LONDON (ICIS)--Caustic soda producers are targeting higher prices for second-quarter contracts in Europe in order to ease pressure on chlor-alkali margins and offset record-high values in ethylene, industry sources said on Thursday.
INEOS ChlorVinyls on Thursday announced a €40/dry metric tonne (dmt) ($53/dmt) increase in caustic soda prices, with immediate effect and as contracts allow.
In mid-February, Dow Chemical also announced a €40/dmt increase, with immediate effect and as contracts allowed.
However, most increases are due to be implemented on 1 April because the majority of Europe's caustic soda contracts are settled on a quarterly basis.
No further announcements have been made, although most producers maintain that increases are necessary in order to offset high energy costs and improve margins in the wider chlor-alkali market, which includes caustic soda, co-product chlorine and their derivatives.
“Margins are appalling,” a European producer said. “There is no point in making a fortune in one product if you are losing a fortune in the other”.
Caustic soda market conditions are largely balanced, as softer demand has been largely offset by limited availability.
Firstly, several ongoing outages continue to limit supply. In southern France, Arkema’s force majeure is still in place, pending the restart of the company's electrolysis units at Jarrie and Fos-sur-Mer.
Secondly, despite recent outage-related tightness, demand for chlorine’s key downstream market for PVC in Europe remains sluggish.
Thirdly, unexpected outages in the upstream ethylene market are also constraining PVC production, chlorine offtake and caustic soda availability.
“Consumption [of caustic soda] might not be fantastic, but it is satisfactory and in balance with product availability,” a European producer said.
Buyers, on the other hand, seem reluctant to accept such increases because of slow downstream demand.
“I know chlor-alkali producers are suffering from the ethylene increases, but it would be very difficult for us to pass these increases on to our customers,” a buyer said.
Another buyer said there was plenty of material available in Europe. “I would be surprised if any producers succeeded in increasing prices in the second quarter,” it said.
($1 = €0.76)
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