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Company to keep selling less product at higher prices

Olin seeking a PVC partner for its upstream output

Olin's overall output of chlor-alkali and other products will remain tight through most of 2022 because of extended production and power outages, CEO Scott Sutton said April 29.

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One of the company's Louisiana chlor-alkali sites hit with a compressor fire and a chlorine leak April 18 will remain shut for several months, and two of six power generation units at its Freeport, Texas, complex will be shut until Q4 2022, he said.

"The negatives there are that we're running short on power in Freeport and we will, at least through the fourth quarter," he said during the company's Q1 2022 earnings call. "We have the complete (Plaquemine, Louisiana) site shutdown. It's a multi-month shutdown and will affect almost all of the second quarter."

Olin on April 20 declared force majeure on chlorine, caustic soda, ethylene dichloride and other products throughout its US operations because of those disruptions, according to a customer letter seen by S&P Global Commodity Insights.

A compressor at the Plaquemine chlor-alkali facility caught fire April 18, and the unit also had a chlorine leak. The power units at Freeport were shut in mid-February because of a mechanical issue.

Sutton said the company expects Q2 2022 results to surpass Q1 2022 by continuing to sell less volume at higher prices despite an expected $75 million reduction in margins and lost sales because of the outages.

He said those outages further squeezed already tight supply of chlorine and caustic soda. Patrick Schumacher, president of chlor-alkali and vinyls at Olin, said that while caustic soda demand in Asia softened in Q1, prices have begun rebounding and European prices have strengthened amid tight supply amid the Russia-Ukraine conflict.

"We see pricing momentum continuing really across the board," Schumacher said.

Sutton said Olin will keep limiting sales into weaker markets, give preference to higher-value derivatives of chlorine and other products and buy volumes to resell to customers when deemed appropriate.

"Even for the products that we do participate in, it may make sense to purchase liquidity from the global market instead of producing the product," Sutton said.

Sales of such acquired products made up 8.1% of Olin's total sales in Q1 2022, up from 4.6%in the year-ago quarter when the Company began stepping up that strategy to manage cyclical markets.

Olin reported $393 million in net income, up 61% from $243.6 million in Q1 2021.

Olin seeking PVC producer for partnership

In addition, Sutton said Olin was seeking a partnership with a PVC producer to provide another outlet for chlorine production.

"Olin currently sits on the capability to incrementally facilitate the next world-scale PVC plant," he said, at a third of the cost of building a multi-unit PVC complex in nearly half the time.

Olin is the sole US chlor-alkali producer without downstream PVC operations. The company's chlorine output feeds chlorinated derivatives and merchant chlorine buyers as well as ethylene dichloride, an intermediate in the PVC production chain. Olin also produces vinyl chloride monomer, made with EDC and the direct precursor to PVC, at Freeport, and that output feeds Shintech's 1.45 million mt/year PVC plant in Freeport.

PVC complexes typically involve five units – power generation, chlor-alkali, EDC, VCM and PVC – at a cost of $3 billion or more. Olin suggests it could provide all the operations upstream of PVC, increasing output through $300 million in debottlenecking projects, for a single new $750 million PVC 500,000 mt/year PVC plant.

Sutton said Olin was not a player in major capacity additions, but "someone's going to have to expand. The number of plants that need to come online to support growth in the future, considering how tight it already is, is pretty significant. It's just that the complete economics just don't exist yet."

Shintech in December brought an expansion across the PVC production chain online at its Plaquemine complex, and has a new 380,000 mt/year PVC unit under construction slated to come online in Plaquemine in 2023.

Westlake expanded output at PVC units in Louisiana and Germany in 2020, and Formosa Plastics USA has a PVC expansion at its Texas complex slated to come online in 2023.

Hydrogen sales a largely untapped market for Olin

Sutton also elaborated on Olin's plans to increase hydrogen sales. The company on April 28 announced a plan to form a joint venture with fuel cell maker Plug Power to produce and market green hydrogen for growing fuel cell demand.

Olin said its chlor-alkali facility in St. Gabriel, Louisiana, will produce 15 tons/day and could broaden that output among its other US facilities.

"Sustainable hydrogen supply is an untapped opportunity for Olin," Sutton said.

One of Olin's smaller chlor-alkali facilities already supplies hydrogen for fuel cells, and the St. Gabriel plan will increase that supply to 6% of the company's overall hydrogen output.

A lot of the company's remaining hydrogen output "is strictly exhausted into the atmosphere," Sutton said, so the company can sell it instead and "develop real carbon abatement."

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