Déjà Vu or New Horizon?Déjà Vu or New Horizon?ISM 2009ISM 2009
Stephen HarrimanStephen HarrimanHarriman Chemsult, LondonHarriman Chemsult, London
Harriman Chemsult was established in 1985 and is widely recognised as the world’s leading authority on chlor-alkali, vinyl and bleaching chemical markets. In 2006 it became part of the Access Intelligence group.Harriman Chemsult publishes weekly and monthly newsletters, periodic multi-client reports, and also undertakes single-client consultancy work.Harriman Chemsult’s price series are highly respected and widely referenced in contracts.
Who are we?Who are we?
The current market positionThe current market position
Demand determined by recessionDemand determined by recessionInitially greater impact on chlorine and derivativesInitially greater impact on chlorine and derivativesReduced operating rates at chlor-alkali plantsReduced operating rates at chlor-alkali plantsLagged decline in caustic soda demandLagged decline in caustic soda demandFalling ECU demandFalling ECU demandDivergent regional caustic soda price trendsDivergent regional caustic soda price trends
The road to the current market position IThe road to the current market position I
Rising caustic soda prices since mid 2004Rising caustic soda prices since mid 2004Higher power costsHigher power costsConsolidation of suppliersConsolidation of suppliersPlant closuresPlant closuresCaustic soda export opportunities in Latin AmericaCaustic soda export opportunities in Latin America
The road to the current market position IIThe road to the current market position II (million st/%)(million st/%)
0
5
10
15
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Chlorine gas productionLiquid chlorine shipped
52
25
52
51
The road to the current market position IIIThe road to the current market position III
-1000
-750
-500
-250
0
250
500
750
100019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
AdditionsRemovalsNet change
Increases: ~4.4 million mtDecreases: ~3.3 million mtNet change: ~1.0 million mt
US production of caustic sodaUS production of caustic soda
0
2
4
6
8
10
12
1419
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Pro
duct
ion
(M d
mt)
75
80
85
90
95
100
Operating rate (%
)
ProductionOperating Rate
US chlorine producer consolidationUS chlorine producer consolidationPre 70s Early 80s Mid 80s Early 90s Late 90s 2008
Cap. (dkt/year) Share (%)
2000s1970s
4011 (31%)DOW
VULCANHOOKERD. SHAMROCK
OXYCHEM3285 (26%)OXYCHEM OXYCHEM
ERCO 93 (1%)
1446 (11%)PPG
STAUFFERPIONEER
CIL ICIFPPIONEERICI
DUPONT
OLIN OLIN
NIACHLOR
DUPONT
OLIN 1465 (11%)
ICI
77 (1%)
500 (4%)BAYER
ICI FPC 727 (6%)
GEORGIA PACIFIC GEORGIA GULF 408 (3%)
12838TOTAL
SHINTECH (part year) 200 (2%)
193 (2%)OTHERS
PENNWALT GOODRICH 186 (1%)WESTLAKE174 (1%)GE PLASTICS
73 (1%)EQUACHLOR
US caustic soda balance 1990-2008 (M dmt)US caustic soda balance 1990-2008 (M dmt)
15
10
5
0
5
10
15
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Apparent ConsumptionExports
ImportsProduction
US imports and exports of caustic soda 2007US imports and exports of caustic soda 2007
Imports 0.8 million dmtExports 1.9 million dmt
1429
401 164
186
404
5 71
US exports, 2000-2008 (dmt)US exports, 2000-2008 (dmt)
0
500000
1000000
1500000
2000000
2000 2001 2002 2003 2004 2005 2006 2007 2008*
BrazilJamaicaSurinamVenezuelaChileOther Latin AmericaCanadaMexicoEuropeAustraliaOthers
* YTD – November 2008
US imports from Europe/Asia, 2000-2008* US imports from Europe/Asia, 2000-2008* (dmt)(dmt)
500000
400000
300000
200000
100000
0
100000
200000
300000
400000
500000
2000 2001 2002 2003 2004 2005 2006 2007 2008*
EuropeChina East CoastTaiwan East CoastJapan East CoastSouth Korea East CoastOther Asia East Coast
Other Asia West CoastSouth Korea West CoastJapan West CoastTaiwan West CoastChina West Coast
* YTD – November 2008
Eas
t Coa
stW
est C
oast
US caustic soda market structure/terminalsUS caustic soda market structure/terminals
ECU demand by end useECU demand by end use
Others6%
Propylene oxide3%
Isocyanates3%
C1s, C2s, Arom.4%
Vinyl/EDC20%
Organics4%
Inorganics9%
CHLORINE
Inorganics10%
Organics11%
Pulp and paper8%
Alumina7%
Detergents3%Textiles
4%Others8%
CAUSTIC SODA
Regional chlorine demandRegional chlorine demand
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%W
OR
LD
Asi
a
Eur
ope
Nor
th A
mer
ica
Latin
Am
eric
a
Mid
dle
Eas
t
Afri
ca
Oce
ania
Vinyls/EDCInorganicsOrganicsC1s, C2s, Arom.IsocyanatesPropylene oxideOthers
56 26 13 13 2 2 1 <1
Regional caustic soda demandRegional caustic soda demand
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%W
OR
LD
Asi
a
Eur
ope
Nor
th A
mer
ica
Latin
Am
eric
a
Mid
dle
Eas
t
Afri
ca
Oce
ania
OrganicsInorganicsPulp & paperAluminaTextiles/rayonSoaps/detergentsOthers
60 27 13 13 4 1 1 2
US ECU production costsUS ECU production costs
Electricity55%
Salt10%
Steam8%
Other7%
Fixed20%
Electricity usage factor = 2.6-2.7 MWh/ECUSalt usage factor = 1.70-1.75t/ECU
US contract/export caustic soda pricesUS contract/export caustic soda prices
0
250
500
750
1000
73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 0809
Export, Diaphragm, Spot $/dmt fob USG Contract $/dst
US regional caustic soda prices ($/dst)US regional caustic soda prices ($/dst)
0
200
400
600
800
1000
1200
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
West CoastMid WestNorth EastSouth EastGulf
Asian caustic soda pricesAsian caustic soda prices
0
100
200
300
400
500
600
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Asia, Spot, $/dmt cfrAsia, Export, Spot, $/dmt fob
External issuesExternal issues
A global industryA global industryHow isolated is the US chlor-alkali industry?How isolated is the US chlor-alkali industry?Influence of regional imbalancesInfluence of regional imbalancesFragmentation of the US marketFragmentation of the US marketLowest common denominatorLowest common denominator
European caustic soda balance 1990-2007 (European caustic soda balance 1990-2007 (MdmtMdmt))
15
10
5
0
5
10
15
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Eastern Europe Production Eastern Europe Apparent ConsumptionWestern Europe Production Western Europe Apparent ConsumptionEastern Europe Net Trade Western Europe Net TradeEurope Net Trade
China caustic soda balance 1990-2007 (M dmt)China caustic soda balance 1990-2007 (M dmt)
20
15
10
5
0
5
10
15
20
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
ExportsApparent ConsumptionImportsProduction
Latin America balance 1990-2007 (M dmt)Latin America balance 1990-2007 (M dmt)
4
3
2
1
0
1
2
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Apparent ConsumptionProductionNet Trade
Market outlookMarket outlook
Operating rates to remain low – determined by chlorine Operating rates to remain low – determined by chlorine Acceleration in drop in caustic soda demandAcceleration in drop in caustic soda demandPower costs less of an issuePower costs less of an issueReady availability of importsReady availability of importsConstraints on ability to export chlorineConstraints on ability to export chlorineInvestment prospectsInvestment prospects
Chlorine in construction:Chlorine in construction:North America PVC outputNorth America PVC output
0
1
2
3
4
5
6
7
8
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Cap
acity
, Pro
duct
ion
(M m
t)
75
80
85
90
95
100
Operating rate (%
)
ProductionCapacityOperating rate
In summaryIn summary
No short term relief from the recessionNo short term relief from the recessionECU demand is falling with some permanent lossECU demand is falling with some permanent lossRevival in ECU supply will be a function of improved Revival in ECU supply will be a function of improved PVC demand PVC demand ConsolidationConsolidationChlorine transportation issuesChlorine transportation issuesMercury cell closuresMercury cell closures
US chlorine packagersUS chlorine packagers
Any Questions?Any Questions?