BLEACHING CHEMICALS

[Neo]

Bleaching Chemicals
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Sodium Chlorate
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North America
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Some business for 2009 has already been concluded and producers report
that a significant increase in pricing has been implemented. It
appears that there is a wide range between the lower end the higher
end, while the latest conclusions are around US$600/st. It is expected
that further business will be finalised at a similar level but it is
too early to comment on the possible outcome. Generally, the sodium
chlorate market remains strong despite the softening in the pulp and
paper sector.

Europe
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Players are focussing on 2009 business and producers have now
commented on their targets from January. Sellers are pushing for a two
digit increase which may take levels to €600/mt and above. A small
proportion of accounts have already concluded, while the majority of
business is expected to be finalised in November and December.
Similarly to the US, the sodium chlorate market is largely unimpressed
by the slowing pulp market and producers are reporting healthy demand.

Deep Sea
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The Chinese sodium chlorate market remained strong throughout H1 2008
and sellers have reported a high number of enquiries from the export
market. Exports reached a high of 7,800 mt in Q2 and significantly
more material went to Japan. Shipments to the country were up by 40%
over the first quarter and landings to virtually all other
destinations are also growing. Export prices have seen another upward
movement and reached a new historical high.

Hydrogen Peroxide
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North America
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The North American hydrogen peroxide market remains tight and the
Hurricane Ike exacerbated the situation in September. Solvay’s Deer
Park plant and FMC’s Bayport unit shut down their units last month but
restarted production at the end of September. However, significant
amounts of material have been missing in the market place. Solvay
declared force majeure and announced 75% allocation shortly after the
hurricane. Supply will likely be restricted until November.

Europe
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European hydrogen peroxide offtakes are still running consistently
ahead of original expectations and total demand is estimated at close
to 3% ahead of the same time last year. At the same time, the Finnish
hydrogen peroxide market has remained weak due to the continuation of
wood availability and price problem since 2007. There are concerns
that the European market will be affected by the progressively
deteriorating general economic conditions and a global recession may
have a visible impact on the hydrogen peroxide market.

Deep Sea
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The hydrogen peroxide market in Indonesia continues to have a good
potential particularly in the pulp and paper sector where there is
growth in existing production as well as a number of significant
possible new projects. Imports into the country were up visibly in H1
2008 with most material coming from Korea, New Zealand and China. At
the same time, Indonesia continues exporting significant volumes and
there has been a minor growth in shipments to other countries.

Soda Ash
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North America
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Negotiations for next year’s contracts are now at an advanced stage in
many cases and a number of conclusions have already been reached.
However, it appears that the spread between the upper and lower ends
of the pricing band is now widening as a consequence of the two-stage
nature of the pricing announcements.

Europe
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The market continues to exhibit extremely tight conditions despite the
recent financial crisis. Producers are reporting high shipment rates,
strong demand and low inventories while buyers are still having severe
difficulties in finding product. There is, though, some caution on all
sides on the medium to longer term impact.

Deep Sea
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Global markets remain on the firm side and the shortage mentality has
been intensified by the loss of shipments from Port Arthur in the USA
due to Hurricane Ike last month. This has had a particular impact on
deliveries into the South American region, where customers were
already operating with low inventories.

Caustic Soda
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North America
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Q4 has begun on an uncertain note in the US chlor-alkali market due
largely to concerns about the relative stability of the US economy and
near term prospects. Amid this turmoil, caustic soda customers,
particularly incremental buyers, are proving to be somewhat elusive in
October. The fact that caustic soda demand has held up has been
remarkable, but the sheer scale of the economic problems that beset
the US were eventually going to impact on caustic soda offtake. Some
sellers are now freely admitting their domestic caustic soda volume is
down from a year ago, and that balances are easing despite two
hurricanes and a raft of force majeure announcements. Several of the
force majeure announcements have been lifted, consequently several
producers have moved from a tight position last month into one in
which they are more comfortable with inventories.

Europe
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The caustic soda market at the start of Q4 is relatively stable,
though there is concern amongst market players about a reduction in
availability during the quarter. The combination of maintenance
outages over the past weeks and reduced rates at some vinyl plants
have tightened supply at a number of chlor-alkali producers. For the
time being, the market does not present any serious issues for buyers,
who appear to be supplied on a normal basis. Producers have been
successful in implementing a price increase in Q4, though the outcome
in some instances has been below the initial target. This has been
particularly the case in the Nordic market, where customers have been
resisting the proposed rises. Caustic soda prices have now risen for
the third successive time this year and, in many instances, are above
the €500/dmt fd threshold.

Asia/Pacific
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The downward momentum continues in October. Export prices from North
East Asia have declined further, while buyers remain generally
cautious amid uncertainty in the market. The current downward trend is
attributed to several market factors. Demand for caustic soda in Asia
is generally weak. Many importers were holding high priced imported
inventory which had been concluded earlier. Hence, many are reluctant
to commit further volume amid uncertainty in the price direction in
Asia. Many chlor-alkali plants in China have resumed operations or
scaled up their production after the lifting of restrictions to
transportation. As a result, there is a surge in inventory rebuild and
sellers were forced to reduce prices in order to liquidate stocks. On
the other hand, the recent decline in spot export prices in North East
Asia has become an attractive option for US and Latin American buyers.


Caustic Potash
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North America
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The North American KOH market remains extremely tight although there
has been some progress with supply at OxyChem. The producer moved from
70% to 90% allocation recently but no real relief is being felt in the
market. A major concern is the very tight KCl market with the result
that some distributors have imported KOH flakes for rehydration. In
addition, the ongoing strike at the Canadian KCl seller Potash
Corporation of Saskatchewan has exacerbated the supply situation and
it is extremely difficult for caustic potash producers to find
alternative supply sources.

Europe
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Caustic potash contracts were reviewed at the end of September and new
business has been finalised with a mix of quarterly and monthly
contracts. Producers have been able to implement a significant
increase in pricing from October due to the tightness in both the KCl
and KOH market and increasing production costs. A main reason for
higher caustic potash pricing is the 10-20% increase in raw material
costs. All KOH producers are on some degree of allocation following
limited raw material availability. No visible improvement is expected
for the remainder of the year and, as a result, there is great concern
amongst buyers.

SPVC
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North America
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PVC in North America is very depressed. The housing market remains in
the doldrums and this is reflected in demand for PVC. Export
conditions are becoming increasingly difficult as world markets
tumble, which is being exacerbated further by the recent resurgence of
the $. At the same time there is considerable downward cost pressure.
Against this background, producers are trying to delay what seems like
the inevitable; the beginning of a downward price trend. Suppliers
have lost considerable production as a result of the recent hurricanes
which has temporarily cushioned the impact of negative pressures in
the market. However, with production gradually recovering it seems
only a matter of time before the market turns.

Europe
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October has failed to support the optimists’ view that demand would
stage a strong recovery based on delayed restocking. It appears that a
large proportion of demand has simply disappeared as a function of the
broader economic/financial turmoil. At the same time, export
conditions are very difficult. Despite the weaker €, this is being
outweighed by free-falling Asian prices spilling into European export
markets. Local producers are trying to manage the situation by
limiting output, but their inventories continue to climb and, along
with this, so does the pressure to sell. October negotiations are yet
to conclude but at least the transfer of lower ethylene costs seems
almost inevitable.

Asia
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The precipitous decline in Asian PVC values has continued. There has
been none of the expected post-Olympics rebound in demand. The market
has become gripped by fear as customers become increasingly entrenched
due to the world economic crisis. China, the engine of the region’s
PVC growth in recent years, often powered by export demand of finished
goods, has experienced a sharp reduction in demand. Producers’
inventories are high. Despite attempts to limit production, there are
no signs that the downward trend in pricing is slowing. In mid October
there were offers of $875-890/mt cfr Hong Kong and China main ports
and there were rumours of export offers considerably lower than this.