Global chlor-alkali producer and distributor Olin expects strong US caustic soda markets in 2018, with more exports and higher pricing, CEO John Fischer said Wednesday.
Fischer said US spot export prices for caustic soda rose $105/mt in the fourth quarter and $260/mt between the start and end of 2017, prompting Olin to export up to 25% of its US output.
The executive also said during the company's quarterly earnings call that chlorine pricing strengthened in late 2017 as well, helping boost Olin's US chlor-alkali sales in the fourth quarter by 17% compared with the last three months of 2016.
Olin's supply agreement with DowDuPont to secure a 20-year supply of ethylene at producer economics helped those results because of the lower feedstock costs, he said.
"We continue to believe that favorable industry supply and demand dynamics we began discussing two years ago for caustic soda remain in place and that Olin is well-positioned to benefit," Fischer said.
High caustic soda margins have given producers worldwide incentive to run chlor-alkali plants at high rates to meet strong demand.
Caustic soda, a key feedstock for alumina, pulp and paper, soap and detergents, is a by-product of chlorine production, and the two are known in the industry as chlor-alkali.
Chlorine combined with ethylene makes ethylene dichloride (EDC), a precursor to polyvinyl chloride (PVC), a plastic critical for the construction industry for pipes, window frames, flooring and siding.
US spot export caustic soda prices have risen from $225/mt FOB USG in March 2016 to $610/mt FOB USG this week, according to S&P Global Platts data.
According to the US International Trade Commission, the country's caustic soda exports through the first 11 months of 2017 were 4% higher than in the same period in 2016. Exports to Australia were 37% higher through November last year than for all of 2016, the data showed.
Fischer said strong caustic soda demand, coupled with last year's closures of mercury-based chlor-alkali plants in Europe and the lack of planned capacity expansions in the US "reinforces our view" that pricing and demand will grow.
He also said Olin was planning turnarounds at chlor-alkali facilities in Freeport, Texas, and Louisiana during the first quarter, which would reduce chlorine and caustic soda output.
While caustic soda and chlorine pricing has been strong, ethylene dichloride prices have been low, with Asian demand for US EDC exports trimmed by greater regional production as a result of strong chlor-alkali run rates, largely in China.
Fischer said the largest risk to Olin's 2018 forecasts is a continuation of low EDC prices. However, Olin diversified its uses for chlorine beyond EDC when it acquired DowDuPont's chlorine businesses in 2015, widening end-uses for chlorine produced alongside caustic soda.
