US Formosa proposes $70/dst caustic soda increase

24 August 2012 23:07  [Source: ICIS news]

HOUSTON (ICIS)--US chlor-alkali producer Formosa Plastics on Friday proposed a $70/dst (dry short ton) (€62/dry metric tonne (dmt)) increase for caustic soda, effective immediately or as contracts allow.

"[The initiative] is to reflect the current tightened supply and low inventory," Formosa told customers in a letter.

Formosa's announcement came after one made on Thursday by Dow Chemical, another US producer. Dow cited "continued tightened supply and strong demand" for its $70/dst increase.

The current assessed contract price for US caustic soda is $500-570/dst.

In late May, Dow was one of several US producers that announced $60/dst increases for caustic soda, after an earlier one of $50/dst announced by Dow failed to be implemented. Approximately half of the May increases have gone through, according to market sources.

A large-volume buyer of caustic soda previously expressed surprise at Dow's initiative.

The buyer said that the latest operating rates for US chlor-alkali producers, which showed June production at 88% of capacity, indicated that demand for polyvinyl chloride (PVC), is healthy both in the domestic and export markets.

PVC uses chlorine as a feedstock, which, in turn, is a co-derivative in the electrolysis process that makes caustic soda.

That means that both chlorine and caustic soda supplies should be decent, the source said, which would tend to disfavour a price increase.

However, another producer, which had not made a similar announcement, said that supply-and-demand dynamics tend to support a price increase.

($1 = €0.80)

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By: Ken Fountain

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