Prices stable through year-end, then softening
By Staff -- Purchasing, 9/2/1999
Following recent increases, chlorine prices have flattened and will remain stable through 1999, before softening in the first few months of 2000, say buyers and analysts.Chlorine has come up off the bottom of the price cycle as the domestic chlorine market has firmed in recent months. In June, producers nominated a $30/ton price increase on top of another partially successful $30/ton increase that went into effect April 1. Buyers indicate that slightly less than half of the increases has been realized.
Several factors have caused prices to flatten.
"The most significant, in terms of price increases, is the recovery of the Asian markets, which have sparked demand for chlorine through the export of vinyl used in polyvinyl chloride (PVC), chlorine's largest end use," says Roger Shamel, president of Consulting Resources, Inc., a market analysis firm based in Lexington, Mass.
Other factors include added capacity scheduled to come on line late in the third quarter of this year. "But the new capacity will be offset to an extent by increased demand as buyers pre-buy material in preparation for year-end Y2K disruptions," Shamel says.
Purchasing's forecast: Look for prices to remain stable during the fourth quarter of this year before softening in the first few months of 2000.
The current domestic prices for chlorine contracts average about $151/ton, according to data from Purchasing's monthly survey of chemical prices. Spot tags average $100/ton. Buyers forecast contract prices to reach $160/ton in the fourth quarter. Similar increases are predicted for spot-market prices, to about $105/ton in the fourth quarter, according to Purchasing's survey data.
"I think there will be some stockpiling of basic chemicals as we get closer to the end of the year, which will do two things," Shamel says. "First, it will keep it stable through the end of the year. Second, buyers will have the materials they need for the first couple of months of next year. That, combined with an undermining of consumer confidence in the U.S. economy, will cause prices to soften," Shamel says.
Robbie Rollins, purchasing manager at Chicago, Ill.-based Morton International, agrees. "Unless we get a boom in PVC demand from Japan, I doubt we'll see more price increases anytime soon because caustic soda prices are still falling," he says.
In supply news, Dow Chemical Co., Midland, Mich., will bring on 300,000 tons of chlorine capacity at its Freeport, La., facility during the fall of this year, which will more than offset the shutdown of chlor-alkali plants owned by Weyerhaeuser Corp., Federal Way, Wash., and Georgia Pacific Corp., Atlanta, Ga.
LaRoche Industries, Inc., Atlanta, Ga., has completed the purchase of ChlorAlp, its French joint venture with Rhodia Chimie, Paris, France. ChlorAlp's operations include a 250,000-tonne/yr diaphragm chlorine and caustic soda plant in Pont-de-Claix, France, and a distribution and bleach production facility in St. Fons, France.
In other supply news, LaRoche recently shut down its Gramercy, La., manufacturing plant due to an explosion at the adjacent Kaiser Aluminum and Chemical Corp. alumina plant. The Gramercy plant shares a variety of services with Kaiser, including electricity and steam. Repairs and restoration of the plant have been restricted by investigations into causes of the explosion.
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