Buyers of US caustic soda surprised by Dow $50/dst initiative

04 April 2012 21:19  [Source: ICIS news]

HOUSTON (ICIS)--Buyers of US caustic soda on Wednesday expressed some shock at this week’s announcement by petrochemical producer Dow Chemical of a $50/dst (dry short ton) price initiative in the midst of the International Petroleum Conference in San Antonio.

Dow’s initiative is effective 1 May or as contracts allow, according to a source at the company. The company cited strong demand from all of its consumer segments and what it foresees as tightening chlorine production as reasons for the initiative.

Dow is still in the midst of implementing a $45/dst initiative announced in February. That was followed by four others in early March.

Reaction to the first wave of announcements had been decidedly mixed, with many market players theorizing that they were an attempt to prevent price erosion.

Several large buyers, particularly in the alumina and pulp and paper industries, have said that prices should in fact be dropping because of both decreased demand and increased supply. Caustic soda is a co-derivative of the electrolyis process that makes chlorine, from which end-product polyvinyl chloride is derived.

The Chlorine Institute, a trade group, said that US chlor-alkali operating output in February was 87%, up from 86% the month before. Total output in February was 938,614 tons (851,500 tonnes) of chlorine and 978,866 tons of caustic soda.

One market player said on Wednesday that it’s possible that Dow’s announcement might be based on internal factors that are hampering its own production of chlorine and caustic. The initiative might be meant as a signal by Dow that its availability will be reduced in the second quarter of the year.

US March contract prices for caustic soda are $470-540/dst (€357-410) FOB (free on board), while export prices are at $420-445/dry metric tonne (dmt) FOB (free on board) USG (US Gulf), as assessed by ICIS.

Major US caustic soda producers include Dow Chemical, Formosa Plastics, Georgia Gulf, Shintech, Occidental Chemical (OxyChem), Olin, PPG Industries and Westlake.

($1 = €0.76)

By: Ken Fountain

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