Prices climb as chlorine tags slip
By Staff -- Purchasing, 4/9/1998 6:00:00 AM
Caustic soda buyers will be paying higher prices this year, if they're not doing so already. Reason: Declining prices and slower demand for co-product chlorine, especially in export markets, are putting upward price pressure on caustic soda.
U.S. bulk prices for caustic soda bottomed out in the third quarter of 1997, with contract for diaphragm-grade caustic averaging $157/ton. Since then, prices have been rising, and more increases are expected. Buyers responding to Purchasing's monthly chemical transaction price survey say prices may jump another $18-$30/ton in the next six months.
Spot diaphragm-grade tags dropped to their low point in the second quarter of 1997 at $168/ton and advanced to an average of $188/ton in the third quarter. This set the stage for a successful price hike.
In October, producers boosted caustic tags by $40/dry ton. This brought pricing up to an average of $190/ton for diaphragm-grade contracts, $202/ton for diaphragm-grade spot purchases, $286/ton for rayon-grade contracts, and $265/ton for rayon-grade spot purchases.
In first-quarter '98, producers instituted another price hike of $35/ton. This time, buyers expect to pay only part of the increase. According to Purchasing's survey, buyers look for tags to jump an average of $10-$15/ton in the second quarter.
Currently, caustic soda supply is tightening because of slowing demand for chlorine. Caustic soda is produced as a co-product of chlorine, so caustic soda availability hinges on chlorine consumption. The ratio of production is 1.1 ton of caustic soda for every 1 ton of chlorine that is produced.
The availability crunch, however, will likely be short term for several reasons. First, several chlor-alkali producers are expanding capacity. Global chlor-alkali supply could increase by 4 million tons/yr or 10% of current capacity if all announced or rumored expansions take effect, according to a study by Consulting Resources Corp., Lexington, Mass.
Second: Buyers, who purchase caustic soda for its alkalinity, can substitute other alkalies in some applications. One option is soda ash. Another is chemical caustic, which is produced using lime soda reaction processes.
Third, long-term caustic soda demand is forecast to grow slightly slower than chlorine demand, according to another study by Consulting Resources Corp.
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