Olin, the world's largest chlor-alkali producer, will permanently shut down 20% of its diaphragm-grade chlor-alkali capacity at its Plaquemine, Louisiana, facility by June 1, the company announced May 18.
The shutdown will reduce output by 225,000 mt, the company said.
CEO Scott Sutton said in a statement that the move was a step in the company's plan to exit high-cost, low-return diaphragm-grade material and redirect freed-up cash to other uses.
In March, the company shut down about 200,000 mt/year of diaphragm-grade capacity at its McIntosh, Alabama, chlor-alkali facility. Olin also remains on track to shut down a 230,000 mt/year chlor-alkali plant at its Freeport, Texas, complex in Q2 2021, Sutton said.
He noted during the company's Q1 2021 earnings call on April 28 that shutdown announcements involved underused assets.
"Not participating in a poor quality caustic market means we don't have need for that asset anymore," he said. "We're going to right-size our balance sheet to be much more nimble in the future."
After Sutton took Olin's helm in September 2020, the company launched a strategy of selling less from products when demand for them is weak, as had been the case for caustic soda from mid-2019 until the start of a gradual uptick in early Q2 2021.
The capacity shutdowns are part of that strategy to sell less caustic soda while focusing on stronger demand for chlorine and products made with it.
The chlor-alkali process involves production of chlorine, of which caustic soda production is a byproduct.
Demand for products made with chlorine has been strong, from construction staple polyvinyl chloride to chemicals used to make foam, paint, refrigerants, crop protection sprays, medical products and electronics.
Demand for caustic soda, a key feedstock for alumina and pulp and paper industries, has been inching up more recently as COVID-19 vaccinations have increased economic activity in some regions. Returns to offices, schools, sports venues and such have increased demand for printing paper, cups, napkins, pint-sized milk cartons and others, market sources said.
Diaphragm-grade caustic soda has higher levels of impurities, such as salt and iron, than membrane-grade. Of the five US chlor-alkali producers, Olin, Westlake Chemical and OxyChem, the chemical division of Occidental Petroleum, make both grades. The other two, Shintech and Formosa Plastics USA, produce only membrane-grade.
