US HCl market sees higher prices coming

HOUSTON (ICIS)–Tightening supply in the US hydrochloric (HCl) acid market has a number of suppliers seeking price increases of $20-25/wet ton.

Producers and distributors this week separately informed their accounts that tighter supply prompted by a number of planned plant maintenances and unscheduled outages had prompted them to seek the increases.

Additionally, demand for HCl in the Permian Basin of west Texas, where it is used by oil and gas producers as part of the hydraulic fracturing process to clean bore holes, has almost doubled since early June, according to sources in that region.

“Demand from the oilfield is definitely a bright spot,” said a representative of a major producer.

But it has been the outages that have most changed market dynamics.

October was heavy with scheduled plant maintenances among chlor-alkali producers, reducing output of chlorine.

An ongoing outage at Covestro’s plant in Baytown, Texas, with a production capacity of 90,000 tonnes/year, has crimped US supply.

Additionally, Canadian producer Canexus on Tuesday announced a force majeure at its Vancouver, British Columbia, production facility with an annual capacity of 50,000 wet tons. That company commands about 30% of the HCl market share in western Canada and the US Pacific northwest, according to Canexus information.

But changing market conditions are also having an effect.

After 19 months of declining demand and prices from falling oil prices and a cutback in drilling activity, some market players are changing strategies.

A large distributor that had been using HCl as a loss leader for its other complement of chemicals is said to have changed its pricing strategy and is no longer undercutting proposed price increases to gain market share.

“They’ve been shooting themselves in the foot and anybody else that was nearby got hit, too,” one disgruntled competitor said.

Suppliers have been quick to react.

Olin issued a letter on Monday saying it would seek $25/wet ton in the US and Canadian dollar (C$) 35/wet ton in Canada.

Reagent Chemical & Research said it would seek increases of $25/wet ton immediately or as soon as contract provisions allowed.   

Axiall, Occidental Chemical, Univar and PVS Chlor-Alkali issued notices in the prior week or earlier.

Other producers were heard to tell clients that they would increase prices, but that could not be confirmed.

US prices began to trend higher in September after an initial round of price increase announcements separately posted by producers.

That increase has been partially implemented, but was somewhat blunted by the distributor pricing policies in use in September, according to multiple market participants.

Major US suppliers of HCl include Axiall, BASF, Olin, Occidental Chemical, Covestro, DuPont, Jones Hamilton and Erco Worldwide.

The US Energy Information Administration says in a new report that horizontal wells are among the highest producing. 

INSET IMAGE: An oil pump jack in a field of cotton in west Texas, USA. (Design Pics Inc/REX/Shutterstock)