Prices likely to soften in July when Evangeline pipeline reopens and chlorine demand improves
US caustic soda producers took a bullish stance as several by 29 May had matched the price increase of $60/dry short ton (dst) announced by OxyChem the previous week.
Dow Chemical, Axiall and Olin had announced increases by Thursday. All matched the $60/dst proposed by Oxy and $65/dry metric tonne (dmt) for Canadian customers. The increases are effective immediately or as soon as contract terms allow, which would be in July, according to market sources.
On 29 May, Formosa Plastics joined those seeking price increases by issuing its own announcement for $60/dst.
Market participants expect other producers to follow suit.
The proposed increases were not a surprise to market participants after The Chlorine Institute released the results of its survey on 20 May that showed April chlor-alkali operating rates at a low 81%.
But producers in April had just ended a four-month quest to raise prices by $50/tonne, only to get about $15-$20/dmt implemented in the market.
The ICIS-assessed net contract price for May is within a range of $420-435/dst on a FOB (free on board) US Gulf basis.
Buyers and traders conceded on 29 May that some of the increase is likely to take, but wide market sentiment was held for a softening in July.
By then, ethylene supplies to Louisiana polyvinyl chloride plants will have been fully restored with the repair of the Evangeline Pipeline and chlorine demand will have improved, bringing more caustic soda to market as a co-product. In addition, product from new capacity from several new plants will be fully in the market.
“We’re expecting more chlorine demand once we get to July,” said a major buyer of caustic who watches market dynamics carefully. “Net availability of caustic has been improving already.”
Producers have cited tight supplies of caustic and low chlorine demand as reasons for the proposed increases.
They are probably justified, said a trader who works in export markets.