US Olin expects bearish chlor-alkali market for 2H 2012

21 June 2012 09:56  [Source: ICIS news]

SINGAPORE (ICIS)--US chlor-alkali player Olin expects a bearish North American chlorine market and a flat caustic soda outlook for the second half of 2012, a company executive said on Thursday.

“We are bearish for chlorine where the market is now. The European and Asian economic slowdown is likely to slow down chlorine derivatives exports from the US,” said Marvin Osborne, director of marketing for Olin chlor-alkali products.

He spoke at the ICIS World Chlor-alkali conference held in Singapore on 21-22 June. The conference is organised by ICIS and Tecnon OrbiChem.

Osborne noted that the US chlor-alkali operating rate in May had fallen to 74% of capacity from the mid-80s% seen from January to April this year.

US exports of chlorine derivatives – ethylene dichloride (EDC) and vinyl chloride monomer (VCM), which a major feedstock in polyvinyl chloride (PVC) production – is expected to continue, albeit at low or negative chlorine values, he added.

US chlor-alkali operating rates will benefit from the seasonal uptick in the water treatment segment, which uses chlorine. However, this is not enough to offset any slowdown in chlorine derivatives export,” said Osborne.

US domestic demand for chlorine will remain soft, Osborne noted, because of continued weakness in the US housing and construction segments.

Olin estimated North American chlorine demand last year totalled 11.8m short tons.

For North American caustic soda, Olin estimated the total demand last year to be at 14.2m short tons, with export demand accounting for 2.4m short tons.

2012 demand outlook for caustic soda is expected to be flat, but Olin is cautiously optimistic on strong US export demand, said Osborne.

Caustic soda production is dictated by chlorine demand as chlorine cannot be stored. In chlor-alkali processing, 1.1 tonne of caustic soda is produced for every tonne of chlorine.

Osborne noted European and Asian chlor-alkali operating rates are expected to be flat because of the weak economy.

US caustic soda exports, however, are expected to remain high in 2012 because of its cost-competitive position resulting from lower energy costs to produce chlor-alkali.

“The US strong cost position is allowing for growing export opportunities to South America and Australia. Electrochemical unit (ECU) cost advantage in the US Gulf will allow exports to Australia to be competitive with current Asian exports,” Osborne said.

ECU value is the combined value of chlorine and caustic soda.

In the longer term, Osborne said the US chlor-alkali industry is bullish on where it is going, given the energy advantage brought by shale gas.

“Energy play will favour the US industry at least for a while and we will take full advantage of it,” he said.

By: Doris de Guzman
+1 713 525 2653

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