Olin running chlor-alkali operations 'not that far above' 50%: CEO

Olin's chlor-alkali and vinyls operations are running "not all that far above 50%" capacity amid weak market conditions, CEO Scott Sutton said July 28.

"Global market conditions are quite poor," he said during the world's largest chlor-alkali producer's Q2 2023 earnings call.

He said Olin was not participating in caustic soda markets as much as usual given declining prices, "and doing that, of course, slows the rate of decline."

"We'll stay in that positioning for a little while," Sutton said. "I expect it to change. Maybe it will change twice over the next year."

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Caustic soda, a byproduct of chlorine production, is a key feedstock for alumina and pulp and paper industries. Spot export caustic soda price were last assessed July 25 at $450/dmt FOB USG, down 43.7% since January, Platts data showed.

Olin has permanently shut more than 1 million mt/year of US caustic soda capacity since March 2021 as part of a strategy to sell less product at higher prices overall and avoid markets deemed weak.

Olin buys product on the market to supply customers when needed, and those purchases reached 17.7% of sales in Q2, the highest since Olin started tracking that volume in late 2020.

"When we're faced with weak market conditions, we may well reduce our production as we have," Sutton said. "It doesn't mean that we back out of the market according to that same production volume decrease. We go out into the market and buy volumes out of the market to satisfy the demand that we have."

EDC sales largely unaffected by downstream VCM outage

In 2022 Olin reduced its downstream ethylene dichloride output amid weak market conditions. EDC is an intermediate used to make vinyl chloride monomer, which in turn is used to make polyvinyl chloride, a construction staple used to make pipes, window frames, vinyl siding and other products.

Olin is the sole chlor-alkali producer in the US without downstream PVC production, so its EDC output that is not used to make vinyl chloride monomer is typically sold into export markets.

Olin shut its 835,000 mt/year VCM unit in Freeport, Texas, in March for a turnaround that lasted nearly two months longer than planned, prompting a June announcement that the extended outage would have a $50 million impact on Q2 earnings.

Olin restarted the unit in mid-June, and ran it at reduced rates until shutting it again July 12 for more repairs.

Sutton said Olin's participation in global EDC markets did not change much during the downstream VCM outages given continued weakness, but PVC prices have risen in recent weeks.

"So eventually, the non-integrated PVC players, where our EDC ends up, are going to get back in business," he said. "We've just got to make sure we get the right product values when that phenomenon happens."

US spot export EDC was last assessed July 25 at $200/mt FOB USG, down $75/mt from the previous week, Platts data showed.

Timing not right for partnership with a PVC producer

Also in 2022 Sutton said Olin was seeking to work with a non-integrated PVC producer to provide upstream support and give Olin another outlet for EDC and VCM. The company backed off of that idea when PVC demand began declining amid high interest rates and high inflation, and that demand has not rebounded. Market sources expect demand for PVC as well as caustic soda to remain sluggish through the rest of 2023.

Sutton said July 28 that Olin recently renegotiated its ethylene supply contract with Dow Chemical, so the company Olin has the ability "when it makes sense" to partner with a vinyls player.

Currently, he said the timing for such a venture "is just not right."