OUTLOOK ’19: US EDC likely to see greater availability, relatively stable pricing

HOUSTON (ICIS)– US ethylene dichloride (EDC) prices will likely remain at their recent higher level during 2019 after more than tripling during the past 12 months.

Availability of the precursor chemical to vinyl chloride is likely to improve later in 2019 when a major buyer of US liquid caustic soda returns to full production in Brazil.

Also new for 2019: Two US producers will gain margin strength with the launch of operations of ethane crackers to make feedstock ethylene. It is not expected to make more EDC available to the market because the ethylene is expected to be used internally.

Shintech in Plaquemine, Louisiana, is expected to inaugurate a 500,000 tonne/year cracker during the first quarter. Formosa Plastics at Point Comfort, Texas, plans to launch operations of an 800,000 tonne/year plant at about the same time.

Prices and availability of US EDC, an intermediary chemical mostly used for the production of polyvinyl chloride (PVC), are largely decided by demand for PVC and prices for liquid caustic soda.

If caustic soda prices are high, as they were for the second half of 2017 and the first 10 months of 2018, producers make more caustic soda, and therefore more chlorine, the co-product of the chlor-alkali process.

When chlorine production outstrips the demand for PVC, producers have used excess chlorine to make EDC to sell in spot export markets. Both Europe and southeast Asia have structural demand for EDC to make PVC and so provide ready markets when US producers run long.

Chlorine is very corrosive and difficult to store. When combined with ethylene, EDC is easy to store and safer to transport.

In 2019, availability is expected to improve, but not to the levels of recent years when unusual developments moved the EDC market.

The factors behind the recent decline and then run-up of EDC prices can be blamed on Hurricane Harvey, which shut down several US chlor-alkali plants and sent prices for liquid caustic soda skyward.

As the chlor-alkali plants returned to production, chlorine ran long and EDC was offered in spot markets and sharply reduced prices.

But by early 2018, production had caught up on the backlog of orders and Alunorte, a giant alumina refinery in Brazil and the largest single buyer of US liquid caustic soda exports, reduced operations by half and reduced its uptake of caustic by 300,000 dry metric tonnes  (dmt)/year for eight months.

Chlor-alkali rates reduced slightly and spare EDC was cut sharply.

US EDC production is down, but prices have risen from $100/tonne FOB US
Gulf to $330/tonne FOB US Gulf through the past 12 months.

Alunorte is expected to return to full production during the first quarter. While it is not guaranteed that the company will get approval from the government to settle pollution claims and return to full production, it is considered likely.

That should boost US chlor-alkali rates and up EDC production and availability, though prices are expected to hold relatively steady.

Focus article by Bill Bowen

ICIS US Outlook Seminar 2019

Register for your complimentary place at the ICIS Outlook Seminar on 30 January in Houston, Texas. Join our market experts as they cover the key developments, potential growth opportunities and future trends in the petrochemicals and polymer markets. Secure your place now.