OUTLOOK '13: Europe caustic soda market expected to remain tight

28 December 2012 13:04  [Source: ICIS news]

By Glynn Garlick

LONDON (ICIS)--The European caustic soda market is very tight at the end of 2012, and this is expected to continue into 2013.

Weak consumption in the polyvinyl chloride (PVC) market has led to a drastic reduction in the output of its feedstock, chlorine. This has tightened the market for chlorine's co-product, caustic soda, putting upward pressure on prices in a tight market.

First-quarter contract price talks have already begun, with INEOS ChlorVinyls targeting an increase of €140/dmt (dry metric tonnes) ($187/dmt), while other players are said to be targeting plus €80/dmt.

One seller said: “A further tightening market in Q4 2012 suggests that a significant price increase for Q1 2013 seems to be realistic.”

The state of the general economy in 2013 was difficult to predict, added the seller.

“Most likely, demand in major chlorine downstream markets (PVC for construction) will be on a relatively low level in comparison to quite stable demand of many caustic soda consuming industries,” said the seller.

“This leads to the expectation that… availability in Europe will be on the tighter side or at least stable in comparison to the second half of 2012.”

Producers Dow Chemical and AkzoNobel have been operating strict control on orders and have not had any material available for the spot market, according to company sources.

Some sellers said they had been approached by other sellers to see if they had any spare material, but had none to offer.

Technical problems at producer KEM ONE’s caustic soda plant at Fos-sur-Mer in southern France, following a maintenance turnaround, did not help matters.

There has recently been buying interest from the US East Coast, but sellers had no spot material available.

Some producers say stocks below 300,000 tonnes are an indication of limited supply in Europe.

Figures released by industry body Euro Chlor show that stocks in the EU, plus Norway and Switzerland, have been below this figure throughout 2012, and hit a new low for the year at 213,986 tonnes in October.

Producers do not expect the tightness to ease until chlorine production operating rates begin to climb. They were at 77.7% in November, according to Euro Chlor figures.

Another seller said it did not see anything changing in relation to this situation in the first half of 2013.

This was because there would be no upside from the economy, in particular construction, and the situation would remain the same.

The electrochemical unit (ECU) is the combined price/value of one tonne of chlorine and 1.1 tonnes of caustic soda. If the ECU is higher than the cost of the production, then the process is economically viable. So at a time of low PVC consumption, producers are looking for higher caustic soda prices in a tight market. 

However, a major buyer said that price rises for caustic soda could open the door to imports into Europe, possibly from the Middle East and the US.

Saudi Arabia’s Sahara & Ma’aden Petrochemicals Co will start up its 250,000 tonne/year caustic soda and 300,000 tonne/year ethylene dichloride (EDC) plant in the first quarter of 2013.

($1 = €0.75)

By: Glynn Garlick

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