OWI Chlor Alkali aggregates publically available industry information and economic indicators to provide you with unparalleled intelligence.
OWI Chlor Alkali is committed to providing you with powerful and timely insights and how they affect the industrial chemical market. Below is a repository of alerts we’ve shared.
As most of you probably know, Mike Hurley, Senior Vice President of Old World Industries - Chemical Division, passed away on February 27, 2020 at the age of 62. To many of us, Mike was so much more than a boss. He was a leader, a mentor and more than anything, a friend. His generosity and his willingness to help, regardless of how tired he was from all of the travel he did, were traits we will always remember and admire. Not sure there is anyone in the world who could step into the enormous shoes he’s left behind, but Mike always said he had the best team in the industry and we are going to work hard to live up to that praise and carry on his legacy of passionately fighting on behalf of the customer. With that, let’s turn to the one thing Mike loved more than anything, aside from his family of course, Caustic!!!!
As most of us can attest, these are unprecedented times for not only the chlor-alkali market, but the economy in general. The CoronaVirus Pandemic has sent shockwaves through the financial markets and caused major metropolitan areas to be essentially locked down. These are only a handful of the headlines we have seen this week:
At this point, there is no one who can look at all that’s happened and accurately say where we go from here. First and foremost, we need to ensure the health and safety of everyone and when the dust settles, the government will have to consider bailouts of major US industries.
With all of that said, we need to take a step back and examine the C/a market fundamentals and have an honest conversation about what could potentially happen. C/a manufacturing has continued with supply chains intact. Terminals are open to distribute product, trucks and rail cars are moving and delivering product to customers. Operating rates in the first two months of the year were up from prior year, buoyed by a strong start to housing in 2020. New home starts have been hovering around 1.5MM – 1.6MM, however, permits for new homes in January rose to the highest level seen since March of 2007, an indication Spring building season was to be busy.
Exports were surprisingly slow to start the year, at only 197,599 DST in January which is down over 90,000 DST from the prior month and from January 2019. (US Census Bureau) We expect there to be a bounce-back in exports in February, but the fact remains this was the lowest monthly export volume in over a year and a half. Globally, metals prices have cratered, and aluminum in particular has been hard hit. Alcoa recently revised its 2020 global aluminum demand growth rate down to below 2%. And this was before recent events. Alumina producers are continuing to run despite falling prices and ever-rising inventories but as global growth slows even further, rates will be in jeopardy.
With all of this as the backdrop, US Producers are gearing up to push through an announced price increase April 1st. Increase amounts range between $30 and $40 DST depending on producer. Based strictly on the data, there is little to no reason to think this increase would be different from prior attempts. Supply is ample, demand is tepid. Period.
However, no one can honestly say these are normal times. The uncertainty surrounding the CoronaVirus cannot be understated and in particular the news received this week. As everything comes to a halt in March, extending minimally through April, GDP will pull back as Goldman is predicting, and we will see chlorine rates fall as a result. The old chlor-alkali adage holds true, “Chlorine is 2/3rds of US GDP Growth.” If we see operating rates take a hit in April and May (low 80%’s to high 70%’s), caustic will tighten and substantial increases in the market could happen. Lower energy costs (Oil below $30 / barrel) also makes European and Asian C/a producers much more competitive on Chlorine derivatives, potentially hurting chlorine demand further. With this specter looming, buyers might make the decision a small increase today is warranted as most will want to build inventory in the face of rising price uncertainty.
With more news coming in daily, it’s nearly impossible to predict how the economy and specifically the chlor-alkali market will react. I know a lot of readers come to this report for an honest, open assessment of the chlor-alkali market and a forecast of things to come. The seemingly endless stream of negative news and unprecedented events makes it difficult to accurately forecast where things are headed because each day is worse than the prior. We will continue to update our customers as things progress and the frequency of these postings will increase to ensure our customers are supplied with the most up to date information.
Thank you for the trust you have been in OWI to be a supplier to you and more than ever, thank you for your business.
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