Price and market trends: US caustic soda contract prices stay flat

14 February 2014 00:00 Source:ICIS Chemical Business

Producers fail to achieve the $40/dry ton increase despite higher energy costs. New production set to come online

US caustic soda contract prices for January settled at a rollover of December’s levels after an initiative by producers for a $40/dry short ton increase failed to gain traction in the market, ICIS confirmed on 6 February.

Producers have said they need the increases to cover rising costs for natural gas, which has risen about 45% in the past four months.

But buyers counter that most of that natural gas cost increase occurred in recent weeks on cold weather heating demand and is likely to be a temporary.

Some buyers view the price initiatives – another failed in late fall, as well – as defensive moves to keep caustic soda prices from dipping during the slow time of the year as demand wanes during the seasonal downswing.

Chlor-alkali rates, which have increased to supply chlorine for downstream vinyls demand, has also likely pushed up supply of caustic as a co-product of chlorine production.

The ICIS assessed price holds in a range of from $515-585/dry short ton.

New production from Westlake’s chlor-alkali production facility in Geismar, Louisiana, is coming online this quarter with an estimated 350,000 electrochemical units (ECU) of annual production. That translates into 350,000 tonnes of annual chlorine production and 385,000 tonnes of annual caustic soda production.

Dow Chemical, in partnership with Mitsui, is also cranking up an 800,000 ECU facility in Freeport, Texas, during the quarter. But the company has said it will retire a similar amount of capacity in Freeport that uses older, less efficient production methods.

Even with more production coming on line, producers have not given up their efforts to raise prices.

Dow and OxyChem have rescinded temporary value allowances that allowed deliveries at current prices. The withdrawal means that the companies can seek the increase without the 30-day notice usually imposed by contracts.

One of the companies said that it expects to get a $30 increase in February and the other $10 in March.

By Bill Bowen