FocusEurope export caustic prices plunge on growing stocks

30 May 2012 10:57  [Source: ICIS news]

LONDON (ICIS)--Export prices in the European caustic soda market continue to fall on rising world caustic soda inventories and increasing competition among suppliers, market sources said on Wednesday.

Figures from industry body Euro Chlor show that caustic soda stocks for the region comprising the EU27, Norway and Switzerland were at 278,994 tonnes in April, 11.6% higher than the March level of 250,098 tonnes, and 18,319 tonnes above the April 2011 level of 260,675 tonnes.

Some producers say stocks below 300,000 tonnes are an indication of limited supply and that product availability for spot and export business is limited after weather-related outages in the first quarter. However, buyers say there is plenty of material available, with some reducing intake ahead of the traditionally slow months of July and August.

This trend is not unique to the European market. Softening demand from the key downstream alumina and pulp and paper markets have led to growing global stocks and falling FOB (free on board) values in the Middle East, the US east coast and northern Africa.

As demand from the alumina sector in Asia and Australia – the world’s largest caustic soda importer – has shrunk, Middle Eastern producers have been left with additional quantities of caustic soda and forced to search for alternative export outlets.

So far in 2012 they have sold large quantities of lower-priced caustic soda into the southern Europe and the northern and southern African markets, altering regional supply and demand balances and forcing local producers to decrease their export offers.

The Mediterranean market has been particularly sensitive to import pressure. While supply has gradually improved after outage-related tightness in the first quarter, demand has remained sluggish for most of 2012, driven by the worsening eurozone debt crisis.

Low-priced imports from the Middle East have further lengthened the key net importing markets of Turkey and Italy, accelerating the downward trend in domestic and export pricing.

Deals were concluded in the week ending 25 May at $340/dry metric tonne (dmt) FOB Spain and at $350/dmt FOB Egypt for delivery in the Mediterranean, while price ideas from other southern European producers were assessed at $350–370/dmt FOB.

As of 25 May, ICIS assessed the Mediterranean spot price for liquid caustic soda at $340–360/dmt FOB MED (Mediterranean), down by $135–155/dmt from January.

In northwest Europe, the market is largely balanced, with stable to soft demand being offset by low operating rates. While some producers say they have reduced production to meet softer demand, others say that demand is satisfactory and that poor chlorine offtake is behind production cuts.

Despite balanced domestic fundamentals, export offers have experienced a steady decline, as producers with higher inventories are faced with falling prices in their traditional export outlets: the Mediterranean and the US east coast.

According to industry players, US producers have reduced caustic soda domestic prices in an attempt to take market share from European importers and sustain sales volumes in a weakening market.

“When US suppliers are long they want market share,” an alumina producer said.

An export deal to the US east coast was confirmed at $360/dmt FOB NWE (northwest Europe) in late May, while price ideas from other northwest European players were assessed at $370–380/dmt FOB. Freight costs to the US east coast are estimated at $80/dmt, according to a European producer.

As of 25 May, ICIS assessed northwest European spot prices for liquid caustic soda at $360–380/dmt FOB NWE, down by $80/dmt from January.

Some players say that if export values and volumes remain low in the third quarter, producers could be forced to concentrate on the European market, lengthening supply and depressing domestic prices.

Others were confident that depressed demand for chlorine derivatives was likely to reduce chlor-alkali production and shrink supply for caustic soda in the third quarter, allowing for higher caustic soda prices.

($1 = €0.80)

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By: Abache Abreu
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