LONDON (ICIS)--European caustic soda spot prices on a free on board (FOB) basis remain flat but US sanctions on Russian producer Rusal could tighten the market, according to sources.
US sanctions imposed on major aluminium producer and caustic soda buyer Rusal are expected to potentially lengthen the US market, particularly in combination with reduced run rates at several Brazilian alumina refineries.
"[For] May and April, the US is selling diaphragm grade at any price. When really needed, they can give any price simply to move out product. [The] US lost 600,000 dmt/year [dry metric tonnes/year] of caustic soda sales in annual measurements," a buyer said.
Market sources said that Rusal is seeking alternative diaphragm grade caustic soda sources in Asia, the Middle East and Europe.
Rusal purchases more than 250,000 dmt/year of caustic soda from the US.
As a result of its large requirements, if Rusal purchases material from European producers this may tighten the European market as a whole.
"[Rusal] is usually a diaphragm consumer, so [the] USG can become long on diaphragm," one trader said
"The effect in NWE [northwest Europe], Med [Mediterranean] and Middle East will be that Rusal has to buy there, and there is only membrane grade. It will tighten the market," the trader added.
European trade activity is expected to be relatively low in the second quarter as a result of numerous planned turnarounds taking place from March onwards, which will reduce overall potential caustic soda availability in the European market.
Mediterranean import markets have lengthened because of imports towards the end of 2017 and in early 2018.
Turkish sources said that caustic soda prices have continued to fall, but noted that there might be fewer shipments of caustic soda available for May.
"I am seeing [a] price decrease at the market, but it looks there are not too many shipments to Turkey in May," a trader said.
Mediterranean export prices as a whole stood towards the bottom end of the previous ICIS range this week.
NWE FOB export prices also stood stable.
NWE prices were assessed at $590-610/dmt FOB, whilst Mediterranean spot prices were assessed at $550-565/dmt FOB, stable compared to the previous week.
Focus article by Chris Barker
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