The litmus test for the global economy

EU Cl2 Apr13.pngOperating rates in European chloralkali markets are confirming the general slowdown in demand across the continent. Total chlorine production was already down 1.9% in 2012, with H2 operating rates averaging just 75.7%. And sadly, March data from Eurochlor suggests the usual burst of activity in Q1 has been extremely fragile. As the chart shows:

• Operating rates (red square) were 76.9% in January, and 78.3% in February
• They then fell to 75.5% in March

At the same time, stocks of caustic soda rose sharply from 242kt to 260kt

Clearly producers are continuing to do a good job of cutting output in line with demand, in order to avoid a repeat of 2009’s problems – when caustic stocks peaked at 352kt. But it is extremely worrying that construction and other key demand sectors are clearly continuing to struggle.

Chlorine and caustic soda production are a key indicator of economic growth. They have been produced in large volumes for over a century, and have a extremely wide range of uses from pharmaceutical and aluminium production to detergents and disinfection.

If they are not doing well today, in the seasonally strongest period of the year, then it is hard to be optimistic about the general outlook for H2.