Archive
The Advantage Newsletter — 9/6/2006
| 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 | 92%-- | 88%-- | 90%-- | 90%-- | 96%-- | 88%-- | 93%-- | -- | -- | -- | -- | -- |
| Prices Per MMBtu | $8.43-- | $7.09-- | $6.35-- | $6.42-- | $6.03-- | $5.65-- | $5.67-- | $6.34-- | $5.37-- | -- | -- | -- |
MARKET ANALYSIS UPDATE 20 October 2006
As the 2006 calendar year end approaches the chlor-alkali market has ever changing variables. First, while the data shows imports of caustic to the east and west coast at a dramatic 74% increase in volume through July 06’ the last four months have had the brakes applied in regards to price decreases. Western European producers are tight in supply and material-shipping fob the Far East does not offer aggressive prices at all. Globally we have a much different supply then we were presented for U.S. coastal region consumers for 4th qtr 05 and first half of 06.
The main reason can be attributed to the shortage of ethylene (C2) in many regions leading to higher cost for material, which then affects chlor-alklai operating rates (reductions) due to the difficulty in production cost of vinyl derivatives. In Asia Cl2 values are at zero value into vinyl production thus why run plants very hard? The end result is that less chlorine leads to less caustic soda. Or another way of viewing the dynamics is that the ECU selling price in Asia must be fully supported by the caustic side of the molecule.
Domestic demand for caustic is stable and as far as the U.S.Gulf manufactures are concerned the chlor-alkali market is much different currently than international activity. For starters the ECU margin return for domestic chlor-alkali producers is extremely rewarding. With the merchant market for chlorine prices above $300/ST fob on average and the caustic soda fob U.S. Gulf pricing at $300/dst we have a $600 ECU+- . The last two months have also provided the lowest natural gas (NG) cost in over two years with below $5/mmbtu allowing strong profitability for manufacturers.
The recent price increase for chlorine ($25/ST) is still being pursued in the market. Demand though may soon present a hurdle to this attempt. The demand for Cl2 into vinyl is slowing and the economy for new housing is tapering off. There has been talk of a potential caustic soda price increase attempt by U.S. Gulf producers to for Jan 1st. It is our feeling that operating rates for chlor-alkali would need to decrease sharply for this to actually be implemented. Historically as January increase is often difficult to obtain, but perhaps global supply is providing domestic producers with this idea.
All in all U.S. producers continue to enjoy great return on investment. In the next 30 days negotiations for supply of caustic to the alumina industry will begin.
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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