29 October 2013 16:53 [Source: ICIS news]
HOUSTON (ICIS)--US caustic soda supply is expected remain tight as the industry continues to see low demand for chlorine, which would keep operating rates low, executives at chlor-alkali producer Olin said on Tuesday.
Demand for chlorine is expected to decline during the normal end-of-the-year slowdown as the industry exits bleach treatment season, Olin CEO Joseph Rupp said during a conference call on the company’s Q3 earnings.
Chlorine and caustic soda are produced in about a 1:1 ratio, and lower production of chlorine would result in less caustic soda as a co-product.
“The reality of it is there is no increase in demand in North America for both chlorine and caustic this year,” Rupp said. “Our view is that the most important element here is chlorine demand would drive operating rates in respect of near capacity, so as we go forward next year, we would have to see increase in demand.”
During the third quarter, Olin kept operating rates at about 86%, and that number is expected to drop to the mid-70s in Q4.
“There has been a significant drop in the industry as well,” said John Fischer, chief financial officer at Olin. “We’ve already have put caustic on order control at Olin Systems because we expect if this trend on operating rates continues, it will have underlying costs to all our customers.”
Fischer said if that is the case, he would not be surprised to see caustic soda price increases in the first half of 2014.
($1 = €0.72)
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