Market Dynamics
US Sept caustic soda falls $10/dst, sellers seek Oct hikes
Time: 2014-10-13 Source from: ICIS
HOUSTON (ICIS)--US liquid caustic soda contracts for September settled $10/dry short ton (dst) ($9/dry metric tonne (dmt)) lower last week, but on Monday the discussions centred on proposed price increases for October with some US suppliers charging $30/dst more for material delivered that month.
Prices for contracts have fallen the past two months even as producers sought to gain increases in a market operating with a prevailing perception of long supply.
The September decrease brought US domestic contract prices to $390-410/dst after a $20/dst decrease in August.
"Today is a non-event," one distributor said after hearing that price increases would be imposed separately by two producers and a competing distributor. "We can't take the volumes that they want us to, as it is."
Producers are arguing that production rates of caustic soda's co-product chlorine will fall because of high ethylene costs. Ethylene and chlorine are used to make polyvinyl chloride (PVC), chlorine's largest downstream derivative.
The PVC market is clouded by skyrocketing ethylene costs. Lower production of chlorine will mean lower production of caustic soda, this argument goes.
That, coupled with large export volumes of caustic soda in September and October, will lower domestic availability for caustic, they say.
"We will be increasing our pricing by $30/dst on October 1," said one chlor-alkali producer.
"We have cut operating rates every month since June on high ethylene costs," he added. "We plan to cut October production by 12%."
Buyers now counter that November will likely be the beginning of the destocking period, when producers and distributors lower their inventory to reduce their tax bills. Production and buying then begins anew at the start of the new year during the restocking period.
"They are not going to be able to raise prices until someone places an order and is told that they will have to wait because they don't have it in stock," another distributor said.
The US's largest caustic soda producers include Axiall, Dow Chemical, Occidental Chemical (OxyChem), Formosa Plastics, Shintech, Olin and Westlake Chemical.