PVC export boom to Turkey supports EU chloralkali demand

EU Cl2 Feb15European chloralkali producers ended up having a relatively good year in 2014, despite having been over-optimistic about likely demand levels in Q3.  They held operating rates at 78% in Q3, in line with H1 levels.  But realism soon prevailed, and producers quickly cut rates to average 75% in Q4 to compensate.

The chart shows the detail of developments since 2009 (based on EuroChlor data).  It highlights the annual change, to avoid seasonal fluctuations:

  • The red line shows the operating rate in %, and the black line shows the level of caustic soda stocks in KT
  • These are the key drivers - the industry obviously prefers high operating rates for chlorine, but has to keep stocks of co-product caustic under control
  • Overall, a good balance was achieved as chlorine production saw a 2% increase to 9.6MT versus 2013
  • At the same time, caustic stocks ended the year at a reasonable level of 250kt, 13% lower than in 2013

EU PVC Feb15The key to this relative success is shown in the second chart.  This focuses on PVC exports from the EU as these are critical for chlorine volumes.

Back in August, the clouds circling the Ukraine and Russia meant that sales to the Former Soviet Union were likely to weaken.  By November, data from Global Trade Information Services shows volumes were down 11% versus 2013 and 4% versus 2012.

But the good news was a recovery in sales to Turkey, which jumped 40% versus 2013 and 50% versus 2012. This success was due to increased volumes from France and Spain:

  • French sales to Turkey jumped 62% versus 2013 to 170kt, whilst Spanish sales jumped 68% to 60kt
  • As a result, US exports to Turkey fell by 21% to 170kt, despite its cost advantage from shale gas
  • Overall, this compensated for the doubling to 200kt of Mexican imports into the EU itself

The chloralkali business is the bedrock of European industry, due to the wide variety of its end-uses from pharmaceuticals to laundry products.  Its performance in 2013 highlights the increasingly difficult outlook for many areas of business, as well as its underlying resilience.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. Paul is also an invited member of the World Economic Forum’s Global Agenda Council. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.