Europe 2016 HCl contract prices could decrease on availability

LONDON (ICIS)–Northwest Europe 2016 contracts for hydrochloric acid (HCl) could see decreases on the back of increased availability and stable demand, sources said on Thursday.

Negotiations for 2016 annual contracts are ongoing and are expected to continue throughout December. Players this week have said that decreases are likely for NWE (northwest Europe) contracts on the back of expected increases in availability due to new capacity coming online and stable demand conditions expected to continue into 2016.

BASF inaugurated its 300,000 tonne/year toluene diisocyanate (TDI) plant in Ludwigshafen, Germany, on 17 November.

HCl is produced as a by-product of several chemical processes including those used to make caustic soda, polyvinyl chloride (PVC) and isocyanates. The chloralkali production processes often recycle HCl, whilst isocyanate producers are the key sellers in the European market.

One producer has spoken of €30/tonne decreases on contracts in Germany which are currently assessed at €45-70/tonne FD (free delivered) Germany, adding that despite originally targeted rollovers to small decreases it felt “we learnt very fast that with these prices we would not be competitive.” Later saying “…you do it or you lose business, this is clear, it is for sure that if you do not make these price levels then you are out.”

A broker based in Belgium, where prices are currently €60-80/tonne FD Belgium, has also said: “Certainly we hear €20-30 [decreases] for Belgium as well, [but it’s] still early, we are just starting now.”

Prior to this week, players on both the buy and sell side of the market have spoken of rollovers to small decreases, though many have said it was unclear what effect the additional capacity would have on annual contract negotiations.

One broker last week said that it did not believe the new plant would significantly alter overall capacity in the market, due to planned closures and maintenance in 2016. Meanwhile the producer this week said: “They have to bring onstream of HCl, okay [the] question is how much more will come, but more will come that’s for sure, more than today.”

The new plant at Ludwigshaven is not thought to be running at full capacity, but production rates are expected to be ramped up by the end of the year. The company also operates a plant in Schwarzheide, Germany, which they say will be taken out of operation as production at the Ludwigshafen unit ramps up.

Discussions for 2016 contracts are ongoing with many expected to reach settlements by the end of the fourth quarter.