at its Plaquemine, Louisiana, facility. ….
at its Plaquemine, Louisiana, facility.
The company also reduced chloralkali production at its McIntosh, Alabama, facility, and reduced capacity at its Freeport, Texas, location. CEO Scott Sutton said that the move was a step in the company’s plan to exit high-cost, low-return diaphragm-grade material and redirect freed-up cash to other uses. (The company is reducing participation in weaker markets.)
Further, because demand for PVC products has been strong, the company has said that it will focus on the PVC component of chlorine use.
Then this April, Olin invoked force majeure defense on chloralkali products; meaning they would not be able to fulfill contracts on chlorine and related products, because a compressor caught fire at its Plaquemine facility.
Meanwhile, last August, Oxychem, a division of Occidental Petroleum Corp., announced it was closing its chlor-alkali plant in Niagara Falls because of poor market conditions and high costs to move products out via rail. Rail transportation of chlorine is costly given the volatility of the product. Transportation of less volatile products, such as plastic resins, is much less so.
Between growing demand for PVC and decreased chlor-alkali production, North American-sourced chlorine available for trichlor manufacturers has decreased by about 20 percent, Mike Egeck, Chief Executive Officer of Leslie’s Pool Products, said on the company’s earnings call this May.
Then there is the price of urea, the third major component of trichlor. According to Leslie’s, the price of urea has quadrupled since Russia’s invasion of Ukraine. Russia and Ukraine are two of the worlds major exporters of urea, which is used primarily in fertilizer.
Moyo Labode, Leslie’s chief merchandising officer, told Bloomberg that the resulting price increase “is going to be a shift that will last in perpetuity because there aren’t new facilities coming online.”
And all of that was before Westlake Chemical also invoked the force majeure defense on chlorine and all grades of caustic soda throughout the U.S. in June, 2022.
Westlake’s chlor-alkali production “has been directly and adversely impacted due to the sudden and unanticipated failures of critical processing equipment,” the company stated in a letter. “These equipment failures have disrupted the manufacturing process thereby resulting in limited availability of chlorine and caustic to our customer.” For more details, see page 6 of this issue.
According to Egeck, “Given these challenging supply dynamics and continued robust demand, we believe it is highly unlikely the cost of trichlor and the retail price of chlorine tabs will go down in 2023.”