Occidental planning overhaul of some chlor-alkali assets: CFO

Occidental Petroleum's chemical division is considering an overhaul of some chlor-alkali plants to increase capacity to produce higher-value caustic soda, CFO Robert Peterson said Feb. 25.

Speaking during the company's Q4 2021 earnings call, Peterson said OxyChem is investing in a study regarding modernization of "certain" US Gulf Coast chlor-alkali assets to convert to membrane-grade from diaphragm-grade caustic soda capacity.

That switch would reduce carbon intensity per ton of caustic soda produced and "provide the opportunity for a significant expansion of our existing capacity to meet growing demand for our key products," he said.

OxyChem expects to make a final investment decision later in 2022, "at which time we will be prepared to share additional details," he said.

Diaphragm-grade caustic soda has higher levels of impurities, such as salt and iron, than more pure membrane-grade. Of the five US chlor-alkali producers, OxyChem, Westlake and Olin manufacture both grades, while Formosa Plastics USA and Shintech produce only membrane-grade.

Caustic soda is a key feedstock for alumina and pulp and paper industries.

Olin has reduced its overall chlor-alkali output with shutdowns of diaphragm-grade capacity to reduce sales into what the company sees as weaker markets.

The company in Q3 2022 will permanently shut its remaining diaphragm-grade capacity at its McIntosh, Alabama, chlor-alkali unit, which will push diaphragm-grade capacity shutdowns to 855,000 mt/year since early 2021.

Caustic soda is a byproduct of the production of chlorine, which is the first link in the production chain for polyvinyl chloride, a construction staple used to make pipes, window frames, vinyl siding and other products.

OxyChem's assets include facilities in the PVC production chain as well as other chlorinated products.

PVC demand rebounded strongly: Peterson

Peterson said he expected demand for both caustic soda and PVC to remain strong throughout 2022. Multiple chlor-alkali turnarounds in Q1 2022 and more in May was seen keeping caustic soda supply tight as demand increases with more paper use amid increasing returns to offices, he said.

And for PVC, housing construction and remodeling demand was expected to remain strong in the US.

Peterson said PVC demand rebounded strongly from an initial crash in April 2020 at the height of coronavirus-related shutdowns. Caustic soda demand that was weak in 2019 remained so until early 2021, when economic activity picked up. As workers returned to offices, schools reopened, travel began increasing, and large gatherings such as sports events re-emerged, along came higher demand for paper products like cups, napkins and more.

Both products enter 2022 "with so much more momentum," Peterson said, though the company expects demand to "normalize" by the middle of the year or later.

Occidental reported Q4 2021 net income of $1.44 billion, up from a $610 million loss in Q4 2020 when demand had not yet recovered from coronavirus setbacks and inflation had yet to push up product prices.