Olin announces price rise for North American caustic soda

Olin, the largest global chlor-alkali producer, has announced a price increase for North American caustic soda, the fourth such announcement this year, according to a letter to customers obtained by S&P Global Platts.

The letter issued Tuesday said Olin would increase off-schedule prices of diaphragm-grade and membrane-grade caustic soda by $40/dst in the US and C$50/mt in Canada. Olin said its order control program based on 100% allocation remains in effect, with required lead times of 72 hours for truck shipments, 14 days for railcar shipments and 30 days for barge shipments. The price increase will be effective immediately or as contract terms permit, the letter said.

The other four US chlor-alkali producers -- OxyChem, Shintech, Westlake Chemical and Formosa Plastics -- were expected to follow suit with similar price increase announcements, as is typical after a producer issues such an announcement.

However, the increase may not take effect. Olin CEO John Fischer has said such increases typically take three months to show up in contracts, and markets rejected increases of $50/dst in the US and C$60/mt in Canada that were announced in August. Producers also announced price increases in February and May. In February Olin, OxyChem, Shintech and Formosa each announced $85/mt price increases, while Westlake announced a $40/mt increase and followed up with another $50/mt increase. Then in May all five producers announced $40/dst increases for US material.

Industry statistics showed that US chlor-alkali production ran high from May through August, with operating rates ranging 92%-94% before falling to 88% in September and 82% in October, reflecting a seasonal decline in chlorine demand.

During those months when production rate surpassed 90%, Brazil's Alunorte plant -- the world's largest alumina plant -- was operating at 50%, cutting its demand to 25,000 mt/month from 50,000 mt/month. Brazilian regulators and courts imposed the rate cut in March after heavy rainfall generated concerns of contaminated leaks from the plant's bauxite residue deposit. US stocks grew as the outage lasted longer than US producers expected, eventually pressuring US export caustic soda prices to their lowest level since October 4, 2016, a 25-month low. That downward pressure spread to domestic caustic soda prices as well as producers sought the price increases announced in August that were later rejected.

"This demand disruption, combined with seasonally strong PVC operating rates, has been putting pressure on caustic soda pricing in the export market, which will impact caustic soda export and domestic contract prices into the first quarter of next year," Fischer said during Olin's quarterly earnings call last month.

Norsk Hydro, Alunorte's majority owner, remains in talks with Brazilian authorities to lift embargoes and resume normal rates at the plant, but market players expect no such movement until early next year.