Price drop of sodium chlorate caused by abnormal S/D relationship

Sodium chlorate buyers can expect prices to edge up through year-end because of stronger demand, higher operating rates, and strengthening production costs. As a result, spot market prices will nudge up to an average of $360/ton in first-quarter 1999. Contracts will move up to an average of $350/ton.

Through most of 1997, the average domestic contract for sodium chlorate declined, according to Purchasing's monthly survey of chemical buyers. Contracts averaged $370/ton in the first quarter but were down to $340/ton in the fourth quarter. In the first half of 1998, sodium chlorate contracts remained at an average of $330/ton.

Spot prices, meantime, have fluctuated between $327/ton and $341/ton for the past year and a half. In June, however, spot tags jumped to an average of $350/ton. This reflects a price increase attempt by producers. In the second quarter, producers (including Eka Chemicals and Sterling Pulp Chemicals) boosted domestic sodium chlorate prices by $15/ton. Prices in Canada jumped C$20/tonne.

Producers attribute the price increase to stronger demand. Operating rates for the sodium chlorate industry are up to 80%-90% this year, according to producers and industry analysts. This is largely due to a pickup in the pulp market.

Operating costs also are a factor. Sodium chlorate prices declined for the past eighteen months. Meanwhile, electricity and transportation costs didn't get any cheaper, according to a producer of sodium chlorate.

Sodium chlorate capacity levels continue to change. In 1997, Sterling Pulp Chemicals started up its Valdosta, Ga., production facility, boosting the company's total capacity to 460,000 ton/yr. Late in 1997, Eka Chemicals purchased the Tacoma, Wash., sodium chlorate business of Elf Atochem. Eka shut down the 24,000 ton/yr plant but continues to supply customers via the Tacoma barge facility.