Chlor-Alkali Investments Continue to Trend Upward

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Researched by Industrial Info Resources (Sugar Land, Texas). Producers of chlorine and related products in the United States and Canada have enjoyed significant increases in demand during recent years and 2007 appears to be no different. This demand is partly the result of increased production of plastics, PVC, VCM and others in domestic markets. Total capital and maintenance spending for chlor-alkali products in the United States and Canada is expected to reach almost $500 million this year based on current project activity being tracked by Industrial Info as part of the North American Projects Database. This is a significant increase over spending levels for this same segment of the Chemical Processing Industry (CPI) during 2006, which totaled an estimated $336 million.

Likely to be the most significant investment for this CPI segment this year, Pioneer Americas, Incorporated (NASDAQ:PONR) will begin construction early this summer for a $142 million expansion of its Saint Gabriel, Louisiana plant replacing older mercury cell technology with newer membrane cell technology. BE&K Engineering Company has been hired to provide front-end engineering and design (FEED) for the expansion that will ultimately increase capacity of chlorine, hydrogen and sodium hydroxide by an estimated 25%. The award of an E+P+C/M (engineering, procurement and construction) contract is expected to be final this month, with civil construction beginning this spring.

Pioneer’s expansion won’t be the only major investment in the segment this year, Canexus, Limited Partnership, Erco Worldwide, NaClor and Equa-Chlor are each planning major expansions between $20 million and $100 million each. Canexus has a very aggressive plan for the year that makes it among the top spenders in all of Canada. See related Industry Alert titled: Canexus Expected to be Canada’s Largest Spender in the Chemical Industry for 2007.

Bayer Corporation began construction last summer for a major $100 million expansion of its chlorine unit located in its Baytown, Texas complex that is not due to be complete until early next year. PPG Industries, Incorporated also began construction last summer for a major chlorine expansion that is due to be online this year at its Lake Charles, Louisiana plant site. An increase in investments and consistent progress on active projects in this segment of the CPI signal yet another reason the industry’s Confidence Factor recently reached more than 72%.

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