HOUSTON (ICIS)--Olin will continue idling plants as it adapts to weakness in demand, the CEO of the US-based producer of chlorine and caustic soda, vinyls, epoxies, chlorinated organics, bleach and hydrochloric acid said in an update on Thursday.
“We plan to continue to temporarily idle plants to minimise operating costs,” John Fischer told analysts during Olin’s Q2 earnings call.
Olin’s chlor alkali products and vinyls and epoxy businesses remain “challenged” amid the current coronavirus-impacted economic conditions, Fischer said.
Visibility around future demand continues to be limited and customer order patterns remain volatile, he said.
Fischer would not disclose which plants specifically are currently down or may be idled.
However, he said that of the seven different Olin sites that have chlor-alkali plants, "we have had some kind of shutdown at at least five of them over the last four months”.
The company currently has one chlor-alkali plant undergoing an extended turnaround, he added.
Fischer also confirmed that plans to permanently close a chlor-alkali plant and accompanying vinylidene chloride (VDC) facility at Freeport, Texas, remain on track for completion by around end 2020.
The company announced plans to close the Freeport facilities in December 2019.
The end-use markets for Olin’s products that are most impacted by the demand weakness include automotive, aerospace, construction and oil and gas.
Chlorine demand from the urethane and isocyanate sector represented the largest sales volume decline in Q2, “and that demand outlook still remains challenged,” Fischer said.
Despite the continued demand weakness, Olin expects Q3 adjusted EBITDA to more than double from Q2 adjusted EBITDA of $71.5m. For comparison, Q2 2019 adjusted EBITDA was $204.6m.
After April’s low, sales volumes were rising month to month in Q2, and July volumes improved from June, he said.
Improved volumes and higher product pricing are expected to drive the sequential earnings improvement.
In addition, maintenance turnaround costs will be down from Q2 when the company undertook two large turnarounds – for vinyl chloride monomer (VCM) and for epichlorohydrin (ECH).
Olin expects sequential improvement in both caustic soda and ethylene dichloride (EDC) pricing, Fischer said.
Q2 caustic soda pricing in Olin's system increased about 8% from Q1 amid tighter industry availability, “and this trend is expected to continue in the third quarter as Olin’s July price was the highest of the year,” Fischer said.
Fischer is due to step down as CEO next month. He will then become Olin's executive chairman.
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Thumbnail image shows caustic soda. Photo by Shutterstock