Europe caustic soda price falls as supply balances after 2017 tightness

LONDON (ICIS)–European free on board (FOB) caustic soda export prices have continued to trend downwards at the start of the second-quarter, with the market rebalancing following tightness in the second half of 2017.

Prices last week were assessed at $580-610/dmt (dry metric tonne) FOB (free on board) NWE (northwest Europe) and $550-550/DMT FOB Med (Mediterranean), down $10/dmt on the low end and $15/dmt on the high end, respectively.

Average FOB Med prices have now fallen by more than 15% compared to the beginning of 2018, although they remain above price levels seen in the first half of 2017.

European caustic soda spot prices abruptly spiked by almost 40% between early September and early October 2017 due to the deadline for mercury cell capacity closures occurring in the fourth quarter of 2017.

This led to a rush of orders in a situation with suddenly tightened availability.

However, the Mediterranean market steadily lengthened during the first quarter of 2018, and has continued to do so in the second quarter, as a result of larger volumes of imports combined with increased utilisation rates at existing capacities.

As of last week, European, Ukrainian and Russian price offers and deals in Italy and Turkey stood in the mid-$500s/dmt FOB.

“Ex-tank prices in Turkey are in the range of $600-610/dmt FOB. To match this, cost insurance and freight (CIF) prices of $580-590/dmt are needed, so the FOB is down to $530/dmt,” a trader said.

Prices at this level, however, were not confirmed elsewhere.

Sources also said that there is increased interest in Mediterranean sales from Asia and the Middle East for May, with caustic soda potentially available at competitive prices, although sales were so far unconfirmed.

“[The] Egyptians… are looking for prices below FOB MED $550/dmt. [A] Russian exporter is already selling at FOB MED low-$500’s, sales to Israel and Turkey,” a buyer said.

However, the planned turnarounds in Europe from first quarter onwards may potentially tighten the market.

As a result, the outlook for Mediterranean export prices is stable to soft going forwards, but planned shutdowns make this outlook more uncertain.

Spot prices in the mid-$600s/dmt FOB were also mentioned for the Mediterranean last week, although they could not be confirmed to be representative of the market as a whole.

NWE FOB prices also fell slightly, with sources putting the low end of the range on a slightly reduced level as a result of the lengthening of import markets.

Caustic soda is used in the manufacture of pulp and paper products, alumina, soap, water treatment and textiles.

Pictured above: A log pile of freshly cut timber in the Lake District, UK, destined for the wood pulp industry for making paper, one of caustic soda’s end markets
Source: Global Warming Images/REX/Shutterstock

Focus article by Chris Barker

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