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July Market News
Bleaching Chemicals
Sodium Chlorate
North America
Producers are within negotiations for 2009 business but there have been a number of conclusions so far. The announcements were mainly in the US$50-80/st range for the US market and between C$35-50/mt for the Canadian market. It appears that producers have concluded close to their original price aspirations in a number of cases. However, the increase will not be implemented before early 2009. Sodium chlorate supply remains limited and some buyers are focussing on securing their quantities for next year.
Europe
Chlorate producers in Europe have been facing a substantial increase in production costs over the past weeks due to escalating power prices. In June and July, levels increased by almost €20/MWh compared to May 2008. Consequently, producers’ margins have become more and more under pressure and the recent rise has prompted some to run their plants at reduced rates. However, most regular buyers have not been seriously affected so far as the current output still ensures adequate supply. Spot availability remains limited.
Deep Sea
The Chilean sodium chlorate import market has weakened which is reflected in significantly lower shipments in 2007. Imports totalled 12,500 mt; a drop of more than 7,000 mt over 2006. Most material came from the US and it appears that buyers preferred US material to Canadian product. Import prices have developed similarly to global sodium chlorate pricing. Levels reached $730/mt at the end of 2007
Hydrogen Peroxide
North America
Sellers are still receiving a high number of enquiries and offtake is in excess of expectations. Consumption is around 3% higher than in the comparable period last year, while there are no signs of softening. There is a somewhat tighter feel in the market but without any reports of shortages. Suppliers are struggling to rebuild inventory and, with the highest level of seasonal offtake approaching, do not expect a significant improvement in the coming weeks.
Europe
Several producers are pushing for higher pricing following the sharp rise in variable production costs, especially crude oil and natural gas. Arkema has announced a 15% rise from 1 July and it is believed that Evonik and Kemira are targeting similar increases in order to offset higher costs. However, it seems unlikely that producers will be able to renegotiate prices for the volumes covered by annual or longer contracts.
Deep Sea
The South African hydrogen peroxide market was relatively flat in 2007 but continues to have very good potential mainly in the pulp and paper sector. A significant growth in offtake from the industry in the next five years appears likely, while the textile sector has weakened further.
Soda Ash
North America
Preliminary discussions have commenced on the latest round of price hikes that were recently announced for 2009 contracts. However, it appears that very few conclusions have been reached as yet and both sides of the table are keen to explore all the options before making any binding commitments.
Europe
The European market is seeing an unusually intense rate of activity at the mid-point of the year as soda ash producers take strenuous action to gain some relief from the mounting cost pressures. There has been a range of initiatives in the past weeks aimed at providing a temporary boost to flagging margins.
Deep Sea
Negotiations are about to commence between Ansac and its customers in South America for 2009 supply contracts, according to local sources. This is in accordance with schedules in recent years, although some market observers suggest that the US export agency is keen this year to see somewhat earlier conclusions.
Caustic Soda
North America
Producers have announced a second caustic soda price increase for July with nominations in the range of $140-165/dst. Meanwhile, some sellers have implemented the first $230-255/dst but the latest announcements are not expected to be visible in the market before August. In addition, one producer will implement a freight surcharge from next month for both shipments by truck and rail as the latest price increase could not offset the sharp rise in costs. Supply remains tight following several force majeure declarations and, as a result, producers of membrane grade caustic soda are struggling to meet demand.
Europe
Q3 business has been finalised with a substantial price increase, mainly in the €120-130/dmt range. In Northwest Europe, new offers in the mid to high €400s/dmt fd have been accepted by buyers with little resistance due to the ongoing tightness in the market. Several major producers are still affected by limited supply and are carrying low inventory due to earlier or ongoing production constraints. However, the tightness is mainly felt by occasional buyers as most regular accounts are being served on a normal basis.
Asia
The upward momentum in the Asian market continues and spot prices have risen to a high of $550/dmt fob in July. Levels for shipments to the US and Latin America are somewhat higher following several force majeure declarations in the North American market and strong export demand. Some producers in North East Asia were cautious regarding price offers for August lifting as levels in the US Gulf are mainly in the high $700s/dmt fob and suppliers are of opinion that export pricing from Asia may reach $700/dmt fob end of the month. Other sellers are expecting resistance from buyers to these levels.
Caustic Potash
North America
Suppliers were pushing for a KOH price increase from July and have successfully implemented the +$12/cwt in the market. PCS has announced to further increase KCl pricing and, as a result, the upward pressure on KOH prices remains in place. The supplier is looking for +$250/st from 1 September which should translate anywhere from +$7-9/cwt for KOH. Caustic potash availability on the West Coast is balanced to tight, while it appears that regular customers are being supplied normally.
Europe
Buyers in the European market have seen a substantial rise for Q3 business. Depending on starting level, customer size and location, sellers have realised their targets without much resistance and have implemented a rise of €600-700/lmt in early July. At the same time, KCl prices have more than doubled and remain a major concern amongst market players. As KCl availability has tightened further, most potash producers are on some degree of allocation and, as a result, there are KOH supply constraints.
SPVC
North America
By mid/late July, June and July ethylene negotiations had still not settled, which was delaying progress on PVC discussions for July. Resin producers have nominated +8cts/lb. At the time this was based on a preliminary ethylene settlement for June at +5cts/lb which has since been rescinded, nominations of up to +10cts/lb and announcements of +8-15cts/lb for July. However, since then spot ethylene has come under some downward pressure from falling oil values. This is causing a prolonged debate, with the latest indications being +10-12cts/lb for ethylene spread over June and July. This being the case, it would call into question the basis on which PVC producers are currently sticking to their +8cts/lb for July and give some weight to suggestions that it may be spread over July and August. Domestic market conditions remain extremely depressed, but exports are strong.
Europe
PVC producers approached the market in July with nominations between +€90-130/mt. Especially those at the lower end of the scale were talking in non-negotiable terms. The impact of steady margin erosion since Q4 last year meant that it had now become imperative to recover the full cost of this quarter’s ethylene hike without delay. Suppliers have been more disciplined than in recent months, but market conditions have not been entirely supportive. Availability is on the longer side of balanced, although producers’ inventories are under better control than in H1 2008 due to some pre-buying and production losses, there is a seasonally slower element to demand. As such, although July contracts are yet to fully settle, there are signs that on average the market is heading for a settlement of fractionally less than +€90/mt.
Asia
Some PVC producers in North East Asia have announced their August arrival price targets; up $70/mt in the case of one supplier to $1310-1320/mt cfr Hong Kong and Chinese main ports and $1350-1360/mt cfr in the case of another. These bullish aspirations are responding to cost and supply pressures. Suppliers have effectively opted to ignore some weaker pressure coming from a softer finished goods market and focus on rising ethylene feedstock costs. There are also tighter supply conditions in China, due to reduced acetylene-based PVC production.
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