30 November 2012 21:44 [Source: ICIS news]
HOUSTON (ICIS)--US producers of caustic soda proposed increases of $50/dry short ton (dst) and $75/dst may receive at least part, but not all, of their initiatives, market sources said on Friday.
At least four producers have announced increases, and others may follow, according to market participants.
PPG Industries was first, announcing an increase of $75/dst (dry short ton) (€64/dry metric tonne (dmt)) FOB (free on board). The proposal would apply to all grades of caustic soda, effective immediately or as contracts allow.
Dow Chemical announced a $50/dst price increase effective on 1 January or as contracts allow, although that is not restricted to the east coast.
Formosa also announced a $50/dst increase, effective immediately or as contracts allow, citing "current tightened supply and low inventory".
According to market sources, Olin made a similar announcement, but the company has not confirmed it.
ICIS currently assesses caustic soda at $515-585/dst FOB.
In justifying the increase for the US east coast, PPG said, “Shipping costs from the US Gulf coast to east coast ports continue to escalate with a fixed number of vessels capable of servicing the business due to the Jones Act."
The federal Jones Act allows only US-flagged vessels to transport cargoes between US ports unless a waiver is granted.
There have been logistical constraints, including the availability of barges and rail cars, on the northern portion of the US east coast since Hurricane Sandy struck late in October. Low water levels on the Mississippi river have also hindered barge shipments.
PPG also cited restricted availability of caustic soda from Europe because of very low operating rates.
“Demand for liquid caustic soda in the US and on the east coast in particular remains robust. Inventories remain low due to relatively strong consumption supported by exports of liquid caustic soda as well as exports of finished goods in large consuming segments,” PPG said in its letter.
One large buyer said that while producers are correct in citing logistical constraints, it was unlikely that the price increases would be fully implemented.
The buyer said after PPG’s announcement, the other two producers “smell blood in the water” in following with their across-the-board announcements. By the time the increases are supposed to take effect on 1 January, many of those logistical issues may be resolved, the buyer said.
A large distributor also said the producers were unlikely to fully implement the increases.
($1 = €0.77)
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