Archive
The Advantage Newsletter — 8/6/2004
| Chlorine: | Effective Operating Rates Estimated Average Wellhead Prices |
| 2003 | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | Oct | Nov | Dec |
| CL2EOR | 95%-- | 92%-- | 91%-- | 93%-- | 91%-- | 89%-- | 88%-- | 89%-- | 94%-- | 91%-- | 92%-- | 95%-- |
| Prices Per MMBtu | $4.36-- | $5.31-- | $6.52-- | $4.59-- | $4.84-- | $5.21-- | $4.79-- | $4.60-- | $4.46-- | $4.32-- | $4.23-- | $4.95-- |
| 2004 | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | Oct | Nov | Dec |
| CL2EOR | 96%-- | 97%-- | 100%-- | 101%-- | 100%-- | 102%-- | 99%-- | 100%-- | 102%-- | 97%-- | 100%-- | -- |
| Prices Per MMBtu | $5.38-- | $5.01-- | $4.83-- | $5.06-- | $5.48-- | $5.69-- | $5.45-- | $5.21-- | $4.73-- | $5.30-- | $5.91-- | -- |
MARKET ANALYSIS UPDATE August 6, 2004
As August begins, producers of caustic soda have announced another round of price increases ranging from $65 per dry short ton for diaphragm cell grade, to as high as $85 per dry short ton for mercury and membrane cell grade. This increase is slated for September 1, or as contracts permit. Many producers are putting a special emphasis on re-establishing thirty day price protection at the expense of historical quarterly contracts. This latest attempt at a caustic increase comes on the heels of a very successful implementation of a June and July increase totaling $95-115 per dry short ton, depending on the grade. It is important to note that some accounts have put a strong emphasis on newsletter barometer pricing as their “reality window to the market”. But it is K.A. Steel Chemicals’ belief that chemical newswires report on the success or failures of an increase based on large volume accounts, which are not indicative of the market as a whole. In a 12 million dry short ton U.S. merchant market, K.A. Steel Chemicals estimates less than 100 accounts make up 80% of this figure. On the other hand, distribution is estimated to supply between 2-2.5 million dry tons of caustic soda to thousands of accounts that typically don’t hit the radar screen for most chemical newswires. These accounts typically purchase less than 500 dry short tons on an annual basis and are a much more realistic view of pricing trends in the caustic industry. The chlorine increase of $20 per ton went thru successfully as all producers seem to be operating at 100% or better. Demand on a global basis remains strong as most downstream derivatives remain tight. U.S. Railcar loadings are reported as up by better than 5.5% year to date comparison thru July, which historically is a solid reflection of true U.S. growth. Caustic soda demand is strong and supply is quite limited. It is K.A. Steel Chemicals’ belief that membrane and mercury cell grades of material are genuinely short, whereas diaphragm cell material seems quite balanced-to-snug with product dislocation being reported on a more growing basis. Export parcels are being reported in a range of $175-$200 per dry short ton f.o.b. the gulf, with minimal activity. Export volumes are similar to 2003 volumes to date, with imports reporting slightly down compared to totals to date of last year. K.A. Steel Chemicals is beginning to see “portfolio change” that usually takes place as the industry begins to enter a prolonged shortage. This portfolio change is where most suppliers elect to upgrade their account base away from short-term gains to long- term established relationships. We have witnessed a lack of interest by suppliers in municipal bids, industrial bids, dot-coms, reverse auctions, as well as accounts that tie themselves to newsletter barometer pricing. The more severe the shortage and the longer the duration of the shortage, the more producers opt for accounts that give them more wiggle room or flexibility. Most shortages, according to historical data, typically last between 6-9 months, but it is K.A. Steel Chemicals' belief that this eventual shortage could be lengthened longer than most, for we have lost over 2 million dry short tons of capacity since 1999 with fewer players, fewer locations and no expansions on the books for the foreseeable future. K.A. Steel Chemicals' biggest concerns moving forward are with the industry operating in excess of 100%. Any major mechanical failure could severely tighten the market. Chlorine demand in the fourth quarter historically throttles back, which also could further aggravate the caustic supply chain. There are still strong rumors of Vulcan Materials selling off their chemical division, which in itself could cause disruption of supply if rationalization takes place.
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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