Q3 2022 Results of Olin and Westlake

Olin and Westlake, two of the largest US chlor-alkali producers published their Q3 2022 results. Both show the same patterns:

Olin and Westlake increased sales revenues and income from their chlor-alkali products in the first 9 months of 2022. Both companies mention higher pricing as main reason for the revenue- and income increase. For both companies, income increases at a lower rate than revenues. Lower income is explained with higher raw material and operating costs, as well as lower production volumes. However, with Olin’s sales increasing by 50%, and Westlake’s sales increasing by 58%, there is only little room for volume decreases in the first nine months of 2022. 3rd quarter 2022 results are again similar. Sales revenues from the chlor-alkali segment grew by about 40% compared to Q3 2021. Higher sales prices were the main reason. Higher raw material- and operating costs and lower production volumes led to lower incomes. 

Two main factors contributing to high raw material – and operating cost in 2021 and 2022:

Source: World Bank, US Inflation Calculator

In previous blogs, I discussed the decrease of European chlor-alkali production in 2022 as a result of the strong increase of natural gas prices. I also discussed why increasing prices of natural gas in Japan had no impact on production volumes. In the graph below, I compare natural gas prices in Europe, Japan, and the US:

The US has the lowest natural gas price, and it experienced the smallest increase in 2021 and 2022. The relatively small increase was still in the order of 100%, and it did impact the incomes as seen in the company reports. However, the increase did not make US producers un-competitive, and it was not the reason for the decreasing production volumes in 2022. The recent production decrease is mainly caused by the weakness of  the US construction market in past months. The domestic US construction market is the main outlet for PVC, and its demand limits the amount of chlorine that can be produced and absorbed by the market. Over the next months, higher interest rates will continue to slow down the construction market, and chlor-alkali production, accordingly.


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