Univar Acquires Dow Canada Inorganics Distribution

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Univar Canada, based in Vancouver, has signed an agreement to purchase Dow Canada's western Canada caustic soda distribution assets. Those include all related supply and sales contracts, as well as storage and transportation assets—primarily a tank terminal leasehold at North Vancouver, BC—and a proprietary fleet of 374 railcars. This acquisition will increase Univar Canada's annual sales of liquid caustic soda by an amount between 250,000 and 280,000 m.t.

The transaction, which is subject to regulatory approvals, is expected to close before the end of the year. Until it does, however, Univar declined to disclose the value of the deal, or to detail how the company would integrate the new supply chain. Univar Canada is a subsidiary of the global chemical distribution major Univar, based in Rotterdam.

The company would say, however, that the acquisition will enhance Univar Canada's footprint in the distribution of caustic soda in western Canada, primarily the British Columbia and Alberta provinces. The deal will enable the Canadian subsidiary to serve the pulp and paper mills, and oil and gas operators in the region, says Gary E. Pruitt, chairman and CEO of Univar. Univar Canada already has a core operation in western Canada, and the new business will be able to take advantage of the existing logistics network, he adds.

Caustic soda is one of the largest chemical products by volume. It is manufactured by electrolysis of brine, yielding caustic soda and chlorine. This year, caustic producers in the western parts of the United States and Canada have been hurt by the rise of inexpensive imports from Asia, primarily China.

However, at midsummer, China revised its export duties, cutting the competitive advantage of many chemicals, including caustic. Also, demand for both chlorine and caustic has risen across North America. In the third quarter, caustic producers were able to push through a $50/ton price increase, and spot material has been traded as high as $400/ton on the U.S. East Coast.

Market watchers say the move is good for both Dow and Univar. Dow is a major global player in chlor-alkali, but can gain better returns in derivative markets. Univar buys commodity chemicals in bulk, then processes, blends, and repacks to meet the diverse requirements of industrial and commercial markets.

Univar also handles some specialty chemicals purchased pre-packaged and sold on a technical basis, usually under a manufacturer's own brand. Univar handles blending, managing customer inventories, packaging, labeling, warehouse management, waste management, technical support and managing vendor reduction programs. The company operates a network of more than 200 distribution centers throughout the United States, Canada, 18 European countries, and China.

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