Most US caustic soda producers seeking second round of price increases

Most US chlor-alkali producers have announced new price increases this month, in addition to increases announced in February, as industrial demand faces a potentially steep slowdown.

On Monday, Formosa Plastics USA announced a $60/dst increase for all liquid caustic soda products, according to a customer letter obtained by S&P Global Platts, effective immediately or as contract terms permit, as is typical.

Olin and OxyChem, the chemical division of Occidental Petroleum, announced $60/dst price increases for US caustic soda, while Westlake Chemical announced a $70/dst increase, also according to customer letters sent by the companies.

None of the companies responded to requests for comment.

All of the announcements this month were in addition to price-increase announcements in February ranging from $30-$40/dst by all five US chlor-alkali producers.

Market sources said the February increases were still under negotiation, and several sources said they were expected to be rejected in whole or in part. Sources also said the March announcements could be another effort to raise prices by at least as much as producers had sought in February.

Caustic soda prices had been under pressure globally amid pre-virus economic slowdowns in China and Europe, and more widespread industrial slowdowns in key sectors. Caustic soda, a byproduct of chlorine production, is an essential feedstock for alumina and pulp and paper industries, both of which have faced downstream falling prices and waning demand.

Caustic soda prices fell throughout 2019, and most starkly in the fourth quarter, when demand from alumina, pulp and paper, agriculture and other sectors plunged. Export caustic soda prices fell 51% to $200/mt FOB USG in December 2019 through February 2020 from $410/mt FOB USG in March last year. Prices rose 17.5% to $235/mt FOB by March 3 this year, but were last assessed down 4.2% at $225/mt FOB March 24, S&P Global Platts data showed.

A market source said, however, that prices for spot export and domestic caustic soda could strengthen going into the summer on turnarounds, and if producers reduce rates as expected. Chlorine demand has been strong in the first quarter, but demand for chlorine to make downstream ethylene dichloride, a precursor to construction staple polyvinyl chloride, is declining amid coronavirus uncertainties, the source said. That is expected to reduce caustic soda supply and boost prices, although economic fallout from coronavirus slowdowns will likely bring prices back down in the second half of the year.