Editor Ron Coifman, ronald.coifman@icis.com

           NOTE: For full details on the criteria ICIS pricing uses in making these price assessments visit www.icispricing.com and click on “methodology”.

The impact of Chile’s earthquake on global wood pulp and caustic soda markets could be severe, sources in neighbouring countries said during the week ended 5 March.

Market participants questioned the effect downed pulp production and the corresponding lack of caustic soda demand in Chile would have on the global caustic supply/demand balance. Pulp production volumes in Chile could be significantly lower for one month or for much longer, Latin American participants ventured.

The result could be a global caustic soda oversupply, unless other regions of the world pick up Chile’s slack in pulp production.

A majority of Chile’s pulp processing plants are in the “cellulose belt” located in the southern region, the hardest hit by Saturday’s catastrophic earthquake, according to the sources. While cellulose plants in areas to the north of Chile may be operating, most of those located in the cellulose belt are likely shut due to structural damage, or lack of energy or water.

Several days after the earthquake, the affected area was described as isolated, with damaged infrastructure and roads, limited communications, petrochemicals plants down, ports closed, and shortages of food, water, and basic services.

Meanwhile, caustic soda markets in Latin America were largely stable amid balanced supply and demand, according to sources.

In the US, export prices were assessed stable for the first two weeks of March at $170-195/dmt (dry metric ton) FOB USG. Traders indicated export prices might be moving up the latter part of this month.

US domestic contract prices for caustic soda were assessed higher by $5/dst (dry short ton) this week at $195-250/dst for February, as values edged up some more on the $75 increase initiative started in late 2009. Market participants said some contracts were still absorbing final portions of the $75/dst.

Traders and other buyers said no business had yet concluded that reflected the effects of the $80/dmt increase initiative originally intended for February.

In Brazil, price hike initiatives for domestic sales lost traction in March, since not all caustic soda suppliers participated. Caustic values are expected to remain flat this month, sources said. Imports, however, were assessed higher by $20/dmt at the low end of the range.

In Argentina, sources noted stable pricing at posted levels, and no issues with availability. Caustic soda prices stood at $350-400/dmt ex-tank.

In Mexico activity in the caustic soda market was stable with values within the posted range. Import prices were up by $20/dmt at the low end of the spread.

In Colombia, caustic soda import prices were unchanged at $220-270/tonne CFR Colombia, according to local sources.

In Europe, positive sentiment emerged, as caustic soda sellers speculated that firming prices in US could help to bolster the domestic market in March.  Spot market prices were assessed at $185-200/dmt FOB NWE (northwest Europe) and MED (Mediterranean).

In Asia, caustic soda spot prices rose for the first time in almost six months on the back of stronger buying interest and high selling resistance. Spot prices of caustic soda were assessed at $190-210/dmt FOB NE Asia, up by $10/tonne from the previous week.

For caustic soda co-product chlorine, non-discounted prices dropped significantly in January and February, with prices currently at $285-295/st. The Chlorine Institute’s latest release showed January 2010 production rates up 9 points from December at 85%, driven by stronger than expected demand for vinyls and improved demand for caustic.

($1 = €0.74)

This week in ICIS news ( www.icis.com):

05-Mar-10 16:47 US caustic soda export prices pressured up on supply

04-Mar-10 18:37 US PE pipe majors revise price quotes on rapid ethylene hikes

04-Mar-10 09:50 US PVC offers in India fade amid high C2 values, output woes

03-Mar-10 03:41 FocusAsia-US caustic soda price gap thins; hopes for arbitrage grow

02-Mar-10 06:57 China's Yunnan Tiannanye Chem builds PVC, caustic soda plants