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Nov 10, 2023Westlake Corporation Raises Caustic Soda Prices Amid Supply Chain Disruptions
Nov 05, 2024Westlake Corporation announced a price increase for Caustic Soda, effective October 31, 2024, with Caustic Soda prices rising by an additional USD 0.03 per pound. This adjustment aligns with ongoing market changes for Caustic Soda and other chemicals, impacting various dependent industries in the US market.
Westlake’s standard lead times for the Caustic Soda shipments are 14 days for bulk trucks, bulk railcars, supersacks, and 500lb drums, 21 days for 100lb drums, and 28 days for 50lb bags. As supply chains encounter heightened pressures, the sellers need to plan proactively for these changes. Evaluating inventory levels and adjusting purchasing schedules can help lessen the impact of this price increase.
From the supply perspective, Negotiations to revise U.S. rail labor contracts are facing new challenges as major railroads diverge on negotiating strategies, raising concerns over potential operational disruptions. The split in approach among carriers recalls the tense negotiations of 2022, when some unions reached agreements while others prepared for potential strikes, leading President Joe Biden to intervene to maintain freight continuity. This time, two railroads, CSX, and Union Pacific, are pursuing independent negotiations with unions, in contrast to the majority of Class I railroads, which traditionally negotiate through the National Carriers' Conference Committee (NCCC) with the nation's largest labor unions. If railroads and unions go extended periods without an agreement, the risk of freight disruptions could resurface, placing renewed pressure on the U.S. supply chain.
However, the downstream demand for Caustic Soda from the Alumina sector dipped slightly as stronger U.S. economic data dampened expectations of near-term Federal Reserve rate cuts. However, the decline was limited due to alumina shortages that prompted systematic buying by funds. The suspension of exports by Guinea Alumina Corporation, a key supplier, has tightened the alumina market, with potential implications for aluminum production and an increase in the Caustic Soda demand fundamentals.
Summarizing, Supply disruptions and the recent Caustic Soda price increase by Westlake Chemical at the start of November 2024, have heightened concerns about the product availability, contributing to upward pressure on the Caustic Soda prices in the region. Market participants anticipate that U.S. Caustic Soda prices will remain elevated until the completion of maintenance work in November, which could restore supply and ease price tensions. The impact of Hurricane season has also halted industrial production in the US downstream sectors, and flooding disrupted downstream demand for Caustic Soda during this timeframe.
As per ChemAnalyst, the Caustic Soda prices are likely to increase in the coming weeks amid supply chain disruptions and expected elevation in the downstream demand from the Alumina sector.