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Olin to shut Texas chlor-alkali plant

Highlights

Shutdown to be completed before end of 2020

Announcement comes after 77% decline in 3Q earnings

Houston — Olin will permanently shut a 230,000 mt/year chlor-alkali plant at its Freeport, Texas, complex next year, the company announced Wednesday.

The world's largest chlor-alkali producer also will close down a vinylidene chloride plant at the complex, Olin said.

The shutdowns, to be completed "before the end of 2020," the company said, will shave $35 million from Olin's annual operating costs. Olin's fourth-quarter 2019 results will include pretax non-cash restructuring charges of about $65 million associated with the shutdown plans, the company said.

"With today's announcement we have taken necessary steps to reduce our annual fixed costs, align our production capacity with the current needs of the marketplace and focus on the chlorine derivatives that generate the most value for the organization," Olin CEO John Fischer said in a statement.

Chlor-alkali involves production of chlorine, of which caustic soda is a byproduct. Chlorine mixed with ethylene is the initial step in manufacturing construction staple polyvinyl chloride, while caustic soda is a key feedstock in the alumina and pulp and paper industries.

Vinylidene chloride is an intermediate used to manufacture plastic food wrap and solvents used to clean electrical machinery.

Olin's announcement came as US spot export caustic soda prices this week fell to their lowest level in nearly a decade amid sluggish global demand. S&P Global Platts assessed spot export caustic soda prices Tuesday at $195-$205/mt FOB USG based on a fixture done at $200/mt FOB USG, the lowest for spot material since prices were assessed at $195/mt FOB USG February 16, 2010. Prices have fallen 51% from this year's high of $410/mt FOB USG March 19, reflecting global weakness amid economic slowdowns in China and Europe and what several US companies have called an industrial recession in the US.

SHARP DROP IN Q3 EARNINGS

Olin last month reported a 77% decline in third-quarter earnings amid lower volumes and prices, and Fischer said during the company's earnings call that Olin expected weak demand fundamentals to last through year-end.

He said the company saw a significant demand slowdown from a broad spectrum of customers, in sectors including alumina, pulp and paper, automotive, urethane, agricultural, refrigerant, electrical laminate and industrial coatings.

Fischer also said last month that Olin expects long-term demand growth and stronger prices given minimal capacity additions.

As of 2018, Olin estimated North America has 17 million mt/year of chlorine capacity and 18 million mt/year of caustic soda capacity, or 17% of worldwide chlor-alkali capacity, according to the company's annual regulatory filing with the US Securities and Exchange Commission.

SHINTECH TO EXPAND IN LOUISIANA

While Olin's shutdown plans could reduce that overall output, Shintech, the US arm of Japan's Shin-Etsu, aims to start up a $1.49 billion expansion across the PVC chain at its Plaquemine, Louisiana, complex, in the second half of 2020. Shintech's additional 635,029 mt/year of chlorine and 725,747 mt/year of caustic soda output will more than compensate for Olin's chlor-alkali shutdown.

Shintech also is adding ethylene dichloride, vinyl chloride monomer and PVC capacity as part of that project.

Westlake Chemical aims to begin starting up a PVC expansion at its Geismar, Louisiana, complex this month, and Formosa Plastics is planning a PVC expansion at its Baton Rouge, Louisiana, operations to start up in late 2021.

Shintech is the sole US chlor-alkali producer expanding chlorine and caustic soda production.

-- Kristen Hays, kristen.hays@spglobal.com

-- Edited by Bill Montgomery, newsdesk@spglobal.com