Archive
The Advantage Newsletter — 10/20/2006
| Chlorine: | Effective Operating Rates Estimated Average Wellhead Prices |
| 2005 | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | Oct | Nov | Dec |
| CL2EOR | 99%-- | 101%-- | 96%-- | 93%-- | 91%-- | 91%-- | 91%-- | 86%-- | 75%-- | 81%-- | 93%-- | 86%-- |
| Prices Per MMBtu | $5.37-- | $5.44-- | $5.82-- | $6.27-- | $5.86-- | $5.99-- | $6.51-- | $7.48-- | $9.50-- | $10.68-- | $9.29-- | $9.76-- |
| 2006 | Jan | Feb | Mar | Apr | May | June | Jul | Aug | Sept | Oct | Nov | Dec |
| CL2EOR | 91%-- | 87%-- | 89%-- | 90%-- | 95%-- | 87%-- | 93%-- | 93%-- | 93%-- | 86%-- | -- | -- |
| Prices Per MMBtu | $8.43-- | $7.09-- | $6.35-- | $6.42-- | $6.03-- | $5.65-- | $5.67-- | $6.34-- | $5.37-- | $4.90-- | -- | -- |
MARKET ANALYSIS UPDATE 20 October 2006
alkali producers have announced a Jan 1, 2007 price increase of $40/dst for caustic soda 50%. Factors supporting this initiative include:
- Higher import pricing and reduced import caustic availability in the 3rd and 4th quarters has allowed U.S. Gulf producers to be more competitive in the US Coastal regions, thus reducing US Gulf Coast inventories.
- Chlor-alkali operating rates dropped to 86% from the prior three months 93% rates. (Chlorine Institute October 07 Report). Every 1% decrease in operating rates equates to about 125,000/dst annually of decreased Naoh 50% production.
- Dow Chemical’s recent closure of its Ft. Saskatchewan facility at 475,000/dst capacity per year has also impacted supply for North America. While demand is essentially flat the decrease in operating rates into the mid to high 80% range will have an impact.
Current demand for PVC in both the U.S. and Canada is not healthy triggering a double-digit decline in PVC operating rates. The market has no bright spots ahead as housing starts are under pressure in the U.S. and the slow season for PVC is under way. For the first time in several years Cl2 pricing is under pressure in the U.S. It is worth noting that historically, a weakening demand for chlorine is an indicator that economic growth is may be retreating. The Institute of Supply Management November report indicates manufacturing growth is actually contracting for the first time in four years.
Chlor-alkali manufacturers are experiencing increasing energy cost as natural gas prices have risen, however, producers generally continue to obtain better than average profits for the ECU. Overall it is not hard to understand why producers have announced the caustic price increase, but the January 1st timing is one that often presents a problem for success. Many buyers are actively negotiating supply positions for 07 and this often leads to a competitive scenario as re-sellers and producers alike do not want to let go of any market share at all.
Nominations for the Alumina industry have gone out with a wide range of prices. It is expected that Alumina buyers will be in no rush to agree to a price any higher than today’s spot pricing.
Producers may well press hard for the increase and as January unwinds we will see the true direction of this commodity for 2007.
The K.A. Steel ADVANTAGE offers insight into current trends and essential market analysis allowing you to make insightful, well-timed purchasing decisions. With K. A. Steel, customers have the benefit of knowing what K. A. Steel knows. Our customers receive timely coverage of trends in the industry as quickly as the information emerges.
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