China (Mainland)
caustic sosa
Caustic soda is a corproduct of chlorine. Capacity operates at a level roughly equal to the demand for chlorine because it cannot be stored. The main market for chlorine is PVC, and the Dalian Commodity Exchange started up a PVC futures contract back in May of 2009. So, could the PVC contract be used to hedge caustic prices? Maybe, this depends on how prices mirror one another and on the liquidity of the contract.
When chlorine demand is high, chlor-alkali producers are usually willing to accept lower margins for their caustic soda, marker. The same rule applies when demand for caustic soda is stronger.
Since most of the chlorine produced is used to make PVC, the caustic soda market's recent fortunes had been tied to the boom-and-bust cycle of the construction sector Asian market players expected Asia to continue to lead the global economic recovery but acknowledged that uncertainties remained.
But the reopening of the Asia-US arbitrage window would hinge on the success of US producers in hiking domestic caustic soda prices and on Asia's ability to keep caustic soda prices low due to strong chlorine values.Price movements of ethylene-another key component of PVC-may also influence the caustic soda market.
In Asia, ethylene price were decreasing, while price of the material in the US were moving up, which might translate to squeezed margins for US chlor-alkali producers and force caustic soda prices to shoot up further.
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