06 October 2013 12:53 [Source: ICIS news]
BERLIN (ICIS)--European caustic soda sellers are looking to increase prices in the fourth quarter for margin recovery reasons, amid expected tighter supply and to compensate for the possible downward pressure on chlorine derivative polyvinyl chloride (PVC), a caustic soda producer said on Sunday.
The producer was speaking on the sidelines of the 47th annual European Petrochemical Association (EPCA) meeting in Berlin, Germany.
Caustic soda is a co-product in chlorine manufacturing, and while demand for PVC drives chlorine utilisation, integrated chlor-alkali and vinyl manufacturers need to try and seek price compensation where possible.
Integrated chlor-alkali and vinyl players will not want to push PVC sales in October because PVC could be subject to some price softening, on the back of lower ethylene feedstock costs, the caustic soda producer aid.
It added that this could lead to some chlorine output cuts – as is traditionally the case in the fourth quarter, with the slowdown in PVC demand. This could tighten the caustic soda market in October, and enable sellers to compensate with higher caustic soda prices in the fourth quarter.
“Caustic soda prices could edge up, but not by much,” said the seller.
This is in the context of caustic soda demand, which remains reasonable to modest, depending on source.
Other caustic soda sellers said they would look to raise their Q4 contract prices by €50-60/dry metric tonne ($68-81/dmt), citing a need for margin recovery and the expected tightening of the caustic soda market.
Buying sources, however, are strongly resisting any upward price movement for Q4 caustic soda contract business. They said demand is not strong enough to support any price increases, and they have sufficient supply. They consider rollovers or decreases to be more realistic for Q4 business.
There has been continued reference to high downstream aluminium stocks and the resulting limiting effect on caustic soda consumption.
Caustic soda is used in extracting alumina from bauxite, from which aluminium is then produced.
“Caustic soda prices are killing the goose that [has] laid the golden egg,” said one large consumer.
It explained this by saying that caustic soda prices are already high – and pushing prices too high will impact downstream demand. It added that caustic soda is a large part of its costs, and it needs competitive pricing – especially as underlying demand remains fragile.
The same source referenced low aluminium prices and high caustic soda prices, which were impacting downstream profitability. It considered that the priority should be about “keeping the industry alive during difficult times”.
The EPCA meeting runs from 5-9 October.
($1 = €0.74)
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