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The Advantage Newsletter — 9/1/2002
As September approaches, producers of chlorine and caustic are again raising their prices to reflect a tighter market. Dow Chemical initiated the increase for all grades of caustic soda 50% with an announcement of $50.00 per dry short ton, effective immediately or as contracts allow. For all practical purposes, the effective date is October 1st. Immediately, all or most of the remaining producers followed suit. In addition to the increase on caustic, PPG announced an increase on chlorine of $40.00 per ton, effective immediately or as contracts allow. At the time of this update, four other producers followed suit. The increase in caustic seems to be heavily slanted towards the rationalization over the past 3-4 years versus a noticeable pick up in demand. With the closures of Atochem, Georgia Pacific, Weyerhauser, Pioneer, Holtrachem, Vicksburg Chemical, and LaRoche, as well as idled plants such as Oxy (Deer Park), we have seen an estimated 1.5 million tons exit the market. In addition, Dow Chemical will shut down an estimated 400,000 ECU's in the October-November time frame, coupled with an incremental 150,000 ECU's towards the end of December 2002, further tightening an already delicate situation. Interesting Stat: 1970 1980 1990 2001 Avrg. U.S. Plants (TPD) 404 489 577 1,174 Number of US Producers 38 34 26 16 No. of U.S. Plants 70 64 52 34 Gulf Coast Production 55% 61% 68% 72% Obviously there are less regional players, and today larger plants are being built in the Texas-Louisiana area on the ethane grid. There are still a number of regional plants in Wichita, Charleston, Augusta, Natrium and Delaware City that are tossed around as potential closures, but for the foreseeable future will probably survive due to the turnaround in the last few months. With operating rates running in the low 90's, and Dow's soon-to-be closures, it seems with any kind of up tick in the economy we will be maxed out on operating rates. In the past, we have seen operating rates during good times running consistently between 98%-104%. But over the last few years, when the economy went south, very few dollars have been invested in the upkeep and maintenance of these facilities. Now, as these plants attempt to run full out, we are seeing more than usual problems and unscheduled turn-arounds. In recent months, we have seen (to name a few) Dow, PPG, Formosa and Georgia Gulf having problems at various facilities. Recently, Formosa has experienced problems at their Baton Rouge facility, whereas they need to take the plant down for a minimum of two weeks. Some producers are forecasting GDP greater than or equal to 3%; therefore, chlorine demand for 2003 will be in the neighborhood of 2-3%. This forecast, if true, would keep operating rates at or near the 95% level, with little to no capacity expansions slated for the near future.
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