Chlorine      

*Thousands of short tons of chlorine per year produced mostly by electrolysis of brine. Most chlorine is generated by the electrolysis of sodium chloride solution using one of three cell types: mercury, diaphragm or membrane. The electrolysis process produces 1.1 ton of 50 percent caustic soda with each ton of chlorine.

In the last decade there has been a trend of conversion from mercury or diaphragm-cell technologies to membrane-cell technology. This conversion has slowed in the past two years, as depressed margins have prompted producers to scale back investments. Membrane-cell technology is the low cost technology because of superior electrical efficiency.

Cedar Chemical is a subsidiary of Vicksburg Chemical Company.

Equapac Inc. (Santa Ana, Calif.) announced last month it intends to construct a chloralkali facility at Weyerhaeuser's kraft pulp mill in Longview, Wash. The plant is scheduled for operation by mid-2005 with an annual chlorine capacity of 75 thousand tons.

Last year Dow Chemical shut down 186 thousand tons of old chlorine diaphragm capacity in Plaquemine, La. The company has a project in the works to add another 253 thousand tons of chlorine membrane capacity by the end of next year. Last December it also closed roughly 133 thousand tons, or about 20 percent of capacity at its Ft. Saskatchewan, Canada, facility.

OxyVinyls is a joint venture company between Occidental Chemical Corporation and PolyOne Corporation, with ownership shared between Occidental and PolyOne on a 76 percent and 24 percent basis, respectively. Sunbelt Chloralkali is a 50:50 joint venture between PolyOne and Olin Corporation.

In June 2000, Occidental Chemical and Olin announced a plan to merge their chloralkali businesses by the end of that year. Three months later, however, a second announcement stated that partnership negotiations had been discontinued primarily because of regulatory issues. Together, their facilities made up roughly 30 percent of US chloralkali capacity.

Vulcan/Mitsui is a joint venture with Vulcan Chemicals owning 51 percent and Mitsui & Co. holding 49 percent. The JV began production at the new chloralkali plant in 2000, located on Vulcan’s Geismar, La. site. The plant has an annual capacity of 215 thousand tons of chlorine.

Over the past two years, there have been 7 plant closures, temporary and permanent, which removed 1,285 thousand tons of capacity from the marketplace, due to adverse market conditions. This represents almost 10 percent of the US installed capacity. In March 2002, Pioneer Americas idled 222 thousand tons of capacity at Tacoma, Wash. The plant had been operating at half capacity since the year before. In December 2001, OxyVinyls idled 417 thousand tons of chlorine capacity at Deer Park, Tex. In April 2001, Atofina Chemicals idled 107 thousand tons of capacity at Portland, Ore. In February 2001, LaRoche Industries idled 89 thousand tons of capacity at Gramercy, La. and Occidental Chemical idled 377 thousand tons of capacity at Convent, La. In September 2000 HoltraChem Manufacturing permanently shuttered two plants with a combined capacity of 67 thousand tons in Reigelwood, N.C. and Orrington, Me.

Profile last published 9/4/00; this revision 6/16/03.

DEMAND

2001: 12,970 thousand short tons; 2002: 12,995 thousand short tons; 2006: 14,070 thousand short tons, projected. Demand equals production plus imports (2001: 394 thousand short tons; 2002: 450 thousand short tons) less exports (2001: 23 thousand short tons; 2002: 20 thousand short tons).

GROWTH

Historical (1997 - 2002): -1.6 (negative) percent per year; future: 2.0 percent per year through 2006.

PRICE

Historical (1997 - 2002): High, $235 per ton, contract, tanks, f.o.b. Gulf Coast, frt. equald.; low, $40, same basis. Current: $240 to $265, same basis. Chlorine spot prices are currently at $220 to $240 per ton.

USES

Polyvinyl chloride (ethylene dichloride/vinyl chloride monomer), 36 percent; other organic chemicals, 41 percent; inorganic chemicals, 15 percent; water treatment, 4 percent; pulp and paper, 1 percent; miscellaneous, 3 percent.

STRENGTH

Though most chlorinated organic chemicals exhibited slow or negative growth over the past five years, phosgene grew by an average of 6 percent per year because of greater production of isocyanates and polycarbonate. Phosgene alone accounted for nearly 1,600 thousand tons of chlorine last year; about 10 percent of total demand. In the inorganic chemicals category, chlorine is used in the manufacture of many diverse chemicals such as titanium dioxide, sodium and calcium hypochlorites and hydrogen chloride. Demand for chlorine in this application segment grew at an average annual rate of approximately 2 percent during the 1998 to 2002 period.

WEAKNESS

The largest segment for chlorine demand is in the manufacture of organic chemicals. The biggest volume product is ethylene dichloride (EDC), which is the precursor for vinyl chloride monomer (VCM) used to make polyvinyl chloride (PVC). Other large-volume chemicals that consume chlorine are propylene oxide, phosgene and epichlorohydrin. Overall demand growth for chlorine in the manufacture of organic chemicals decreased during the 1998 to 2002 period. Much of this decrease is attributed to byproduct HCl from isocyanate operations being recycled into EDC production via the oxychlorination process. This reduced the amount of virgin chlorine being required for EDC production. Most other chlorinated organics have experienced slow or even negative growth over the same timeframe.

The use of chlorine in the pulp and paper industry as a bleaching agent has decreased considerably in the last decade, in response to environmental pressures to reduce chlorinated organic substances in wastewater effluents. Substitution by chlorine dioxide, oxygen and hydrogen peroxide has resulted in the chlorine decline. Pulp and paper accounted for 7 percent of chlorine’s demand in 1995, but only consumes 1 percent today.

OUTLOOK

The chloralkali manufacturers’ effective operating rate during the first quarter of this year averaged 93 percent, compared to about 88 percent for the first quarter of 2002. The market at this time is balanced, helped in part with the idling of nearly 10 percent of industry capacity over the past two years, and also because chlorine and caustic soda have been performing in tandem lately. With the improving US economy, it is likely that chlorine’s growth will out-perform caustic soda’s later this year and throughout 2004, thereby causing the caustic market to go long giving rise to another unbalanced market cycle. Growth for chlorine over the forecast period is projected to be 2 percent per annum.

HISTORICAL DATA