Demand for Caustic Soda remains robust across all industry segments. COVID related disruptions appear a thing of the past as economies move to endemic status. It remains to be seen how inflationary pressures dent demand. Impact of Monetary tightening and interest rate hikes may also dampen demand and prices.
Supply of Caustic Soda remains stable overall. No major disruptions here.
Energy prices has no general commentary as there is divergence in regions and in basic feedstocks.
We all know Europe is the most vulnerable energy region. Gas prices have been resilient at higher levels in Europe and show no signs of easing. Current Geopolitical tensions add to Energy woes in EU.
https://tradingeconomics.com/commodity/eu-natural-gas
Coal prices post lifting of Indonesian export ban have risen and expected to fall back due to poor buying from China based on pressure from Chinese authorities to benchmark coal prices lower. While we see a $ 10 range of price moves, prices are moderate compared to wild moves in September / October last year.
https://www.fitchratings.com/research/corporate-finance/apac-thermal-coal-prices-to-ease-on-end-of-indonesia-export-ban-14-02-2022
https://www.spglobal.com/platts/en/market-insights/latest-news/coal/021622-indonesian-coal-prices-stare-at-downtrend-amid-lack-of-china-demand-sources
Crude oil is at a multi-year high. Some drivers for higher crude oil are structural as investments in Oil exploration and drilling has been abysmally low since over a decade. With opening up of economies and travel Demand nearly reaches pre COVID levels. There has been a massive drawdown from peak crude oil inventories of June 2020 to average levels prevailing pre COVID. The geopolitical trigger for high crude oil prices is not lost to us. Heightened tensions have pushed up the premium refiners are willing to pay to secure supplies. Low inventory adds to the upward momentum. On the supply side easing of sanctions on Iran could help moderate crude oil prices.
Geopolitical developments may see a realignment of Caustic supply chains and disrupt traditional trade flows. For example Russian Caustic exports to the Baltics and to Mediterranean could have to find another home. Similarly Caustic exports from Ukraine into Mediterranean could be impacted if conflict flares up. US exports to Russian Alumina interests may be curtailed making US Caustic long. Russian Alumina will have to find alternative supplies.
Saudi Arabia production shortfall will continue to drive demand in Asia.
Aluminum prices have been moving up to September / October 2021 levels due to high energy costs and supply woes. This drives caustic consumption into Alumina.
https://www.lme.com/en/metals/non-ferrous/lme-aluminium#Trading+day+summary
Freight markets are high due to a nearly 50 % increase in bunker prices in the last few months pushing up CFR landed prices to importing regions.
PVC and Chlorine demand remains robust. After 3 months of decline we expect and upward move in prices for March shipments. The expiry of Anti Dumping duties on PVC from China and USA to India will see Chinese producers try to regain a market share in the Indian markets. This will lead to realignment of traditional volumes into India. The container shortages and pricing will however keep prices high in the foreseeable future. Rising feedstocks and Ethylene prices will support higher PVC values.
So, friends, I am happy to receive your comments / counter views on above price drivers to enrich the conversation and help derive greater insights into where markets are headed.