Price and market trends: US caustic soda reverse auctions could gain popularity

14 April 2014 00:00 Source:ICIS Chemical Business

Online reverse auctions may become more commonplace in the US liquid caustic soda market, a major buyer said on the sidelines of the International Petrochemical Conference (IPC), run by the American Fuel & Petrochemical Manufacturers (AFPM), on 31 March.

At least two buyers of US liquid caustic have used online reverse auctions in recent weeks to buy medium-size shipments at prices lower than the current published ranges, one of the buyers confirmed.

The parcel subscribed to the auction was for 4,000 tonnes and received a price in the mid-$260s/dry metric tonne, the source said.

US liquid caustic soda

Producers and other suppliers, too, have sought information on the outcome of the auctions, which have been used occasionally, but are likely to become more common, this buyer said.

The auctions are held online. The buyer specifies volume and grade of material and producers vie for the business with competing bids pushing prices down.

REVERSE AUCTION

It is called a reverse auction because buyers proffer the business, sellers submit the bids and price movement is downward.

Another buyer used a reverse auction for about 3,000 dry short tons (dst) and achieved a price of less than $285/dst, that source said. One buyer was an alumina producer and the other uses caustic soda in an intermediary process to make other chemicals.

That fact that several suppliers sought information about the auction is a sign of the interest of the market as new production capacity is set to come into service.

However, another buyer said this was a one-time, unusual circumstance and not likely to be repeated. “It’s not typical of the market and I don’t think producers or traders are going to continue to participate,” said the buyer.

By Bill Bowen