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June News Update
Bleaching Chemicals
Sodium Chlorate
North America
North American sodium chlorate producers are pushing hard for the implementation of price increases at accounts that are currently being reviewed. Producers are targeting a double digit increase and it is understood that some rises were already implemented in April-May. Suppliers are optimistic that they will be able to apply similar increases for contracts which end in June. Meanwhile, customers are trying to resist higher levels and argue that demand is still below pre-recession standards. Nevertheless, there have been no reports of excess availability and the market is described as largely balanced.
Europe
European sodium chlorate production continues at relatively strong rates; it appears that the recovery in demand that has been seen in Continental Europe since Q4 2009 and in the Nordic region mainly since January 2010 is sustainable. Customers are ordering regular quantities from their suppliers, who expect satisfying rates of shipments in the coming weeks. Market players are optimistic that the pulp industry will continue to perform well and the outlook is generally positive.
Deep Sea
Import demand for sodium chlorate in South Korea held up well during 2009 and, for the first time in three years, only saw minor quarterly fluctuations. The economic downturn resulted in a drop in chlorate imports in Q4 2008 and Q1 2009 to 1,700-1,800 mt/quarter, but shipments recovered from Q2 2009 to between 2,400-2,600 mt/quarter and held at this level during the remainder of 2009 and in Q1 2010.
Hydrogen Peroxide
North America
The North American hydrogen peroxide market continues to run relatively firmly and is somewhat stronger than was originally expected even at the start of the year. Inevitably, volumes are still considerably higher than they were during H1 2009 when they were most affected by the recessionary conditions at that time. These large positive monthly variances against 2009 will decline going into the second half of the year. Much more importantly than this, however, total offtakes are now estimated to be running at a rate some 12-14% below the pre-recession peak in early 2008.
Europe
European hydrogen peroxide demand appears to be maintaining a reasonably steady level this year. Volumes in April are reported to have been similar to March and little change is expected in May. The peroxide market in Q1 this year confirmed that the stronger levels of demand consistently seen towards the end of last year were continuing. Volumes were about 10-11% higher than in Q1 2009.
Deep Sea
A significant recovery of the economy began already by Q2 2009, based mostly on an early recovery of exports to China supplemented later by growth in demand from other parts of Asia. Taiwan officially emerged from a deep recession in Q4 2009 after five quarters of contraction. In 2009 as a whole, GDP contracted by 1.9%, which was a much smaller contraction than expected because the rate of expansion was very rapid in Q4 with a year-on-year GDP growth of 9.3%. In Q1 2010, there are already concerns that the Taiwanese economy may be overheating as GDP rose by 13.3% year-on-year and an increase in excess of 5% is now forecast for the year.
Soda Ash
North America
The market was surprised to hear an announcement that a producer intends to raise its pricing from 1 July. The sentiment seems to be that market conditions are appropriate for a price hike but that there is little need to hurry to pass this through since serious negotiations are unlikely to commence for some time.
Europe
The market has been surprised by two major events that are likely to have longer term implications. There was news that a Turkish producer plans to double its capacity. Also, there was the unexpected collapse of the proposed acquisition of a Russian plant at almost the last moment in the negotiations.
Deep Sea
There has been some limited improvement in demand for soda ash in China over the past month but market conditions remain tentative. The slight improvement in offtake rates, however, was insufficient to prevent a continuation of the slippage of domestic pricing that commenced after the Lunar New Year holidays.
Caustic Potash
North America
Early spring agricultural KOH demand has peaked and is now declining. Offtake for industrial grade KCl is stable, but there are indications of very slow growth in the KOH market. Suppliers continue to struggle with the sharp drop in demand that was seen during 2009, but offtake made some major progress in Q1 of this year. Producers are looking to increase prices for 45% and 50% material and levels may rise as of 1 July.
Europe
Producers’ margins remain under significant pressure and two majors have announced a two digit price rise from July, regardless of the developments on the KCl side. The direction of KCl pricing is still unclear and the major supplier K+S KALI GmbH has not commented on its price ideas from next month. KOH demand has improved since the beginning of the year, while buyers feel that the market is adequately supplied. June business is stable as most contracts were concluded on a quarterly basis at the end of March.
Caustic Soda
North America
An ECU increase is pending in the US market, i.e., $35/dst for diaphragm caustic soda and $50/st for chlorine. (One producer initially announced $75/st on chlorine, but has subsequently TVA’d $25/st of the increase to bring it more into line with the $50/st announcements nominated afterwards by co-producers.) While it is too early to speculate on the outcome, it should be noted at the outset that several factors must be in place if an ECU increase is to be successful. The contract price has moved only slightly in June. We have raised prices $10/dst to $330-370/dst, with the expectation that a larger increment will be applied after 1 July.
Europe
The focus of attention of the market is on the Q3 contract negotiations, which are expected to begin shortly. On the one hand, sellers are pushing for price increases of €40-50/dmt in order to improve the caustic soda contribution to the ECU. Several producers have announced a price increase, while others have not yet made a formal announcement, but have indicated that they will be seeking higher prices. On the other hand, buyers are sceptical. Customers believe that the market balance is not supportive of a price increase. Moreover, they have doubts about sellers’ commitment to the price initiative and the credibility of some of the announcements.
Asia/Pacific
The market is seeing a reversal in the price direction for the first time since late February this year. Initially, regional spot export prices extended their gains, peaking at $240-250/dmt fob at the end of May. Subsequently they declined after the alumina settlement price was announced in the first week of June. Regional spot export prices dipped to the $220-240/dmt fob level due to rising inventory pressure and weaker export demand, and some lower prices from China are being heard. The market continues to see strong buying resistance to higher prices and very few parcels are reportedly being committed.
SPVC
North America
As anticipated May PVC contracts have settled 3cts/lb lower. Attempts by producers to retain more of their recent ethylene cost savings met with strong resistance and eventually crumbled, in the face of continued weak domestic demand and export conditions. The early prognosis for June settlements is for this downward trend to remain.
Europe
The PVC market remains generally balanced. Although there are some producer-specific constraints availability is sufficient from elsewhere to cover ongoing demand that remains low by historical standards, albeit marginally better over recent months. June price increases are virtually assured, with discussions currently between +€20-50/mt. Exports are under downward pressure and imports are not an issue at present, though may become so before too long, despite the weak euro.
Asia
The resin market in Asia is under pressure. June business has been concluded lower and there are indications that cargoes for July arrival will be offered at levels reflecting the continued downward momentum. Buying sentiment remains lacklustre as converters respond to reduced seasonal demand and uncertainties plaguing the ethylene and ethylene-based PVC markets.
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