Europe caustic soda prices pushed down by weak demand

LONDON (ICIS)–Weak demand ahead of European summer holidays and improving availability are putting downward pressure on European caustic soda spot prices, according to sources in the market.

Northwest Europe (NWE) spot prices were assessed at $320-325/dry metric tonne (DMT) free on board (FOB) on Friday, down by $20/DMT on the low end and $25/DMT on the high end of the range, while Mediterranean spot prices were assessed at $300-340/DMT FOB, down $30/DMT on the low end.

This marks a significant downward trend for NWE spot prices, which remained stable at $340-375/DMT from early November to early June due to limited availability in the market.

Production at AkzoNobel’s Botlek site in the Netherlands has been down since late 2014 due to ethylene supply constraints, and Dow Chemical’s Schkopau site in Germany has also been running at low rates since early 2015.

This, combined with additional production problems in the European market over the past two months due to ethylene supply constraints, has resulted in limited availability for many buyers over the past quarter. However, the downward movement in spot prices may indicate that this situation is now turning around.

“[People] thought that in June with two major crackers down [there would be] a big price increase for caustic. The opposite has happened… [the] Egyptians and Romanians are running very well, in France only Lavera is down,” one trader said. 

“[We have] low demand in Turkey because of Ramadan and Italy because of summertime… [NWE producers] have 70% of their ethylene demand [fulfilled] – tightness in the caustic market does not exist,” it added, putting prices overall in the low $300s/DMT in both NWE and the Med.

A producer agreed that prices in NWE have fallen, but put levels at closer to $320-325/DMT.

“In general the situation in Europe has improved quite a lot since May- [it is] not that difficult to get a spot cargo in Europe… I heard that there are still some force majeures but in some cases [they have] operating rates at a reasonable level or close to normal,” another source said.

It also noted that the ethylene supply is becoming more plentiful, due in part to the Tarragona cracker in Spain returning to operations.

Another producer noted that some ethylene producers are likely to lift their force majeures in the near future, which will improve availability of caustic soda in the European market.

Early Q3 contract price negotiations are ongoing in the European market, with producers suggesting increases from €40-50/DMT although they note that there has been resistance from buyers, some of which are targeting rollovers. The majority of discussions are expected to be concluded in the first half of July.

Focus article by Chris Barker, follow him on Twitter