Regs drive pricing up through 2Q01

By Staff -- Purchasing, 11/2/2000

Prices: rising steadily

Last year, bleaching material substitution, caused by rapidly rising chlorine prices, applied upward pressure to flat sodium chlorate pricing. This gave producers momentum to nominate price increases toward the end of 1999.

This year, strong demand from changing environmental regulations have kept the market's upward momentum from wavering. Supplies continue to tighten and prices continue to climb.

Buyers have seen price increases for sodium chlorate all year long. According to data from Purchasing's monthly chemical transaction price survey, which is based on buyers' responses, prices averaged about $290/ton for fourth quarter 1999. Producers announced price increases in January, April and July, and have seen prices rise about $40/ton this year, to date. Another $15/ton price increase is scheduled for Oct. 1.

"The market has seen price increases go through each quarter of this year," says Ed Beckberger, commercial director at Sterling Chemicals pulp business, based in Kingston, Ontario, Canada. "And prospects are good for the future. Market conditions show every indication that the October increase will go through," he says.

Purchasing forecast: Sodium chlorate buyers should expect to see continued upward price pressure through April 2001. By then, prices will average about $350/ton on the spot market and a few $/ton less for contract transactions. From there, pricing should stabilize and remain flat for the remainder of 2001.

Supply: tight

Last year's oversupply situation was quickly reversed as more pulp mills changed their operations. Now, producers and buyers agree that material supply is tight and will be so at least for the midterm.

Adding to the tightness of supply is the fact that some plants have temporarily shut down due to high energy costs. According to Beckberger, this tightness has pushed producer production rates from about 93% during the first part of this year to close to capacity now.

"Usually, with the end of the summer, sodium chlorate producers and buyers begin to build their inventories," says Ed Beckberger. "But not this year. People are hard pressed to keep the supply of chlorate flowing," he says.

"Many of our distributor customers are receiving material by rail and are shipping it directly to their customers," says Britt. They're not even stocking any material of their own," Britt adds.

The primary producers of sodium chlorate include Eka Chemicals, Huron Tech Corp., Kerr-McGee, Occidental Chemical, Sterling Chemicals, Elf Atochem and Georgia Gulf. Total U.S. production is about 876,000 tons/yr.

In supply news, Huron Tech Corp. has closed its Claiborne, Ala., facility, citing high energy costs and power curtailments for the decision. This move effectively removed about 35,000 tons of annual capacity from the marketplace.

Demand: strong with environmental regulations

Demand for elemental-free-chlorine (ECF) pulp bleaching chemicals got a major boost from the development of environmental regulations around the world to eliminate chlorine use in paper production. Sodium chlorate, the most viable alternative to chlorine bleaching, has seen a dramatic increase in demand and pricing in the past year. According to producers, demand growth for the sodium chlorate market is estimated at about 8%/yr for 2000.

The U.S. Environmental Protection Agency's (EPA) cluster rules have mandated a phase out of chlorine use in pulp bleaching operations by April 1, 2001. To comply with the regulations, pulpers continue to shift their operations to ECF and TCF (total chlorine free) processes. Most sources believe this rate of demand growth will stay flat or increase as the deadline for ECF implementation in the U.S. draws closer.

Market: robust

The primary market for sodium chlorate is in pulp and paper bleaching. In fact, about 95% of sodium chlorate demand goes into the production of chlorine dioxide wood pulp bleaching agents. Other markets for sodium chlorate include herbicides and defoliants, mining applications, and in the manufacture of rocket propellants, explosives and dyes.