AFPM '12: Costs, downstream demand worry US chlor-alkali players

01 April 2012 17:04  [Source: ICIS news]

HOUSTON (ICIS)--US chlor-alkali players are warily eyeing the rest of 2012, with concerns about costs and downstream demand prevalent even as the economic picture begins to brighten.

While export demand for US polyvinyl chloride (PVC) remains strong, especially to Latin America, the outlook, which is heavily tied to the housing construction industry, is murkier.

In late March, the National Association of Realtors (NAR) reported that US pending home sales fell by 0.5% in February from January, but that residential property sales were still ahead of the same period a year ago.

NAR reported that US sales of existing homes rose by more than 4% in January, but sales of new single-family homes fell in both January and February. Construction of new one-family homes fell sharply in February, according to the US Commerce Department.

Several US PVC producers announced a 3 cent/lb ($66.14/tonne) increase for March, and were meeting some resistance from consumers.

However, market participants said an explosion and fire at Westlake’s vinyl chloride monomer (VCM) facility in Geismar, Louisiana, would give support for the increases. VCM is a precursor to PVC, and the Westlake facility is an integrated one.

Westlake declared force majeure on PVC following the fire.  

For chlorine co-derivative caustic soda, the picture is even more muddled. Producers say they see robust demand, but large consumers like the alumina industry say their demand is dampened.

The Chlorine Institute, a trade group, reported that February’s chlor-alkali operating rate was 87% of capacity, slightly higher than the 86% rate in January. Those figures are lower than the 89% and 92% from the same periods, respectively, a year before.

In late February and early March, several US caustic soda producers announced increases of $45/dry short ton (dst), effective 1 April or as contracts allow, citing healthy demand. But several consumers have rejected that reasoning, claiming the initiatives are an attempt to keep prices from falling.

Pipe grade PVC is assessed at 56.5061.50 cents/lb, and general purpose PVC is assessed at 58.5063.50 cents/lb. The contract price for liquid caustic soda is assessed at $470-540 dst (dry short tonne).

The 2012 International Petrochemical Conference, hosted by the American Fuel & Petrochemical Manufacturers (AFPM), continues through Tuesday in San Antonio, Texas.

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By: Ken Fountain

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