Europe caustic soda Q2 contract prices decrease by €10–30/dmt

18 April 2012 13:53  [Source: ICIS news]

LONDON (ICIS)--Second-quarter contract price negotiations in the European caustic soda market concluded with decreases of €10–30/dry metric tonne (dmt) ($13-39/dmt), depending on source and region, because of downstream weakness and more competitive offers from some local producers, market sources said on Wednesday.

In northwest Europe, some producers achieved rollovers and even minor increases, but the bulk of contract deals settled at a decrease of €10–25/dmt, suppliers and buyers said.

In southern Europe, most contract prices settled with a decrease of €20–30/dmt from March or from the first quarter, depending on whether contracts are settled on a monthly or quarterly basis.

The decreases took producers by surprise, as they remained optimistic that supply limitations, driven by production constraints, would support their efforts to offset record values in ethylene contract prices and improve margins in the wider chlor-alkali and vinyls markets.

Dow Chemical and INEOS ChlorVinyls had announced a €40/dmt target increase for second-quarter contract prices, with immediate effect or as contracts allowed, while other producers were hopeful that at least modest increases would be possible.

However, caustic soda production in Europe has outstripped domestic demand, while Middle East imports have increased availability in the Mediterranean and reduced export opportunities into the key net importing markets of Turkey and Italy, creating a product surplus in the first quarter and exerting downward pressure on contract prices.

While the start of the construction season in Europe has led to rising demand in the polyvinyl chloride (PVC) sector, improving netback value of feedstock chlorine and allowing for more caustic soda production, real demand for caustic soda has remained on the soft side, driven by weak downstream fundamentals.

However, some producers say that demand for caustic soda is in fact satisfactory and that production constraints have limited product availability for spot and export business, adding that price decreases are in effect the consequence of more competitive offers from European suppliers attempting to increase sales volumes and gain market share.

($1 = €0.76)

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By: Abache Abreu
+44 2086523214



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