Shintech sees global caustic soda prices inching up in H2 2023: Shin-Etsu

Top US polyvinyl chloride producer Shintech expects global caustic soda prices to reverse their 2023 declines after producers, particularly those in Asia, have reduced rates to combat demand weakness, the company's Japanese parent, Shin-Etsu, said in a transcript of the company's fiscal Q1 2024 earnings call released Aug. 7.

"Although the caustic soda price weakened somewhat as PVC manufacturing operations increased, the soda price in Asia finally stopped declining," Shin-Etsu said. "There are now many suppliers who adjusted their operations based on profitability, so we expect the international price to turn around."

Asian producers reduced chlor-alkali rates in 2022 as caustic soda demand weakened, and average rates were last heard to be around 80.5%, according to Asian market sources.

European chlor-alkali producers did the same, with June rates at 61.7%, down from 71% in June 2022, according to the latest data from EuroChlor.

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The Chlorine Institute in the US stopped tracking US chlor-alkali rates in October 2021 after Olin, the world's largest chlor-alkali producer, ceased reporting rates in September that year. The institute's September 2021 report was based on reporting from 56% of US chlorine capacity given Olin's decision not to report, after which the institute stopped reporting those statistics.

Caustic soda, a byproduct of chlorine production, is a key feedstock for alumina and pulp and paper industries. Chlorine is the first link in the production chain for PVC, a construction staple used to make pipes, window frames, vinyl siding and other products.

Sluggish demand so far this year

Caustic soda demand began waning in late 2022 and has been sluggish throughout 2023. Shintech said in the transcript released Aug. 7 that given cuts in run rates, the company expects prices to inch up.

"In response, we are anticipating the timing of the turnaround in the North American caustic soda price," the company said.

US spot export caustic soda prices were last assessed Aug. 1 at $350/dmt FOB USG, down $100/dmt from the prior week, Platts data showed.

Some market sources were less optimistic, noting that a recent increase in spot US export PVC prices stemmed more from a supply squeeze from turnarounds and operational issues rather than demand. Once supply normalizes, PVC prices could retreat, sources said.

US spot export PVC was last assessed Aug. 2 at $755/mt FAS Houston, up 10% from early July, Platts data showed.

One of those turnarounds includes Shintech's complex-wide shutdown of its Plaquemine, Louisiana, operations for planned work in October, according to sources familiar with company operations. That complex includes an 890,000 mt/year PVC unit as well as upstream chlor-alkali, ethylene dichloride and vinyl chloride monomer facilities.

Pushing domestic PVC price increases

Shin-Etsu also said in the transcript that Shintech aims to push through domestic price increases to help boost profitability in the second half of 2023.

"Normally, July and August are when demand weakens in the summer, but demand in North America is stable at the moment, so we will work with strong determination to increase prices," the company said.

Shintech and two of the other three US PVC producers are seeking 2 cents/lb ($44/mt) price increases in August and September, for a total of 4 cents/lb ($88/mt) over two months. OxyVinyls has announced a 2 cents/lb increase for August only.

"Normally, July and August are when demand weakens in the summer, but demand in North America is stable at the moment, so we will work with strong determination to increase prices," Shin-Etsu said. The company said it has raised PVC prices in regions other than North America, "which has been a tailwind."