Olin to shut more caustic soda capacity at Alabama plant

Olin will permanently shut down its remaining diaphragm-grade chlor-alkali capacity at its Alabama production facility, the company said Oct. 21.

The shutdown is expected to be complete in the third quarter of 2022, the company said.

The McIntosh, Alabama-based unit can produce 550,000 mt/year of caustic soda and 500,500 mt/year of chlorine. In March, Olin shut 200,000 mt/year, or 50%, of diaphragm-grade caustic soda capacity at the plant, leaving 200,000 mt/year of diaphragm-grade and 350,000 mt/year of membrane-grade capacity. The closure will leave the plant with only membrane-grade capacity.

Diaphragm-grade caustic soda has higher levels of impurities, such as salt and iron, than membrane-grade. Of the five US chlor-alkali producers, Olin, Westlake Chemical, and OxyChem —the chemical division of Occidental Petroleum — make both grades. Shintech and Formosa Plastics USA make only membrane-grade.

When the shutdown is complete, Olin will have reduced its overall diaphragm-grade caustic soda capacity by 855,000 mt/year since early 2021 to reduce sales into weaker markets.

CEO Scott Sutton said in a statement that the 2022 closure "reinforces our commitment to lift our ECU values to a more sustainable level."

An ECU, or electrochemical unit, is a unit of measure that reflects the chemical reaction in the chlor-alkali process in a fixed ratio of 1 unit of chlorine, 1.1 units of caustic soda, and 0.03 units of hydrogen. Chlorine is the first link in the production chain of construction staple polyvinyl chloride and other products, while caustic soda, a key feedstock for alumina and pulp and paper industry, is a byproduct of chlorine production.

Olin had targeted reducing its diaphragm-grade production, as it generally feeds alumina production and sells at lower prices than the purer membrane grade.

Caustic soda demand was sluggish in 2019 and 2020 but has risen sharply in 2021 as widespread access to coronavirus vaccinations prompted more economic activity.

Export caustic soda prices have more than tripled since January and were last assessed Oct. 19 at $700/mt FOB USG, according to S&P Global Platts data. Supply tightened as demand rose when a deep freeze hit the US Gulf Coast, followed by operational problems that hindered output.

Inventories had not recovered by the time Hurricane Ida hit Louisiana in late August, forcing 4.4 million mt/year of US caustic soda capacity offline for up to two weeks.

Olin posted a Q3 2021 net income of $390.7 million Oct. 21, reversing a $736.8 million loss in Q3 2020. Its chlor-alkali and vinyls segment reported Q3 2021 sales of 1.06 billion, up 40.6% from $755 million in the year-ago quarter.

The company attributed those sales to higher pricing, partly offset by lower volumes.