Archive
The Advantage Newsletter — 6/1/2004
| 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 June 1, 2004
The second quarter of 2004 has brought about many changes in the chlor-alkali industry. We have clearly bottomed out on pricing, as early as March, with producers taking a much more disciplined approach on chlorine, as well as caustic, as early as April. Distribution has attempted to increase inventory and has met stiff resistance as producers have exercised a firm order-control program. Domestic merchant producers of chlorine (Oyy, PPG, Olin, Vulcan & Pioneer) have implemented a successful chlorine increase of $75 per ton. As we near July, the same producers have implemented a further increase of $20 per ton. There is speculation in the marketplace from some chemical newsletters that the July chlorine increase is suspect, as increases are reaching or exceeding historical highs. It is K.A. Steel's belief that if history is a strong indicator, prices will move forward as long as the variables remain the same. We have far fewer merchant producers of chlorine and far less capacity than in the past. Therefore, it is fairly easy to establish the possibility of new highs. Operating rates were reported as high as 99% for the previous month. Caustic Soda demand seems to have come into balance with supply. It is our strong belief that diaphragm caustic is balanced to snug, with premium grade caustic soda very tight. Transportation equipment, such as barges, has become scarce and rail car shipments have been delayed as much as six weeks. As demand continues to grow, K.A. Steel Chemicals feels the next twelve to eighteen months will see further increases, even larger than what we've seen in June and July. All producers have formally announced and implemented price increases as early as May 27th. Producers have increased prices for June by $50 for diaphragm grade, and as much as $75 for premium grades. As of today, producers have announced a second round of increases slated for July 1st, ranging from $45 - $75 per dry short ton depending on grades.
| • | Total imports of caustic for 2003 were up 6% over 2002, but fell well short of historical highs by approximately 40,000 dmt in 2001. |
| • | Asia is estimated to represent 25% of West coast supply. West coast contract prices increased by $35 per dry short ton in the month of May. |
| • | As imports dwindled on the East coast, as well as the West coast, Gulf coast inventory supplemented this demand, reducing excess inventory in the Gulf. |
| • | Spot prices for caustic soda in May: end of the month $45 per dry short ton higher than the first of the month. |
| • | Caustic demand in Europe continues to rise and inventories are falling. |
| • | Olin has announced a conversion for half of its Charleston, TN facility from mercury cell caustic soda to KOH. Estimated timeline would be the start of 2005. |
| • | Pioneer has formally announced that they will not start up its Tacoma, WA facility. |
| • | Rumors continue to grow on the possibility of spinning off Vulcan Materials chemical division. |
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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