Cox Chemicals Inc

Cox Chemical, Inc.

On June 15, 2015, Mr. William Todd, director of purchasing of Cox Chemical Products, Inc., of New Orleans, Louisiana, received an email from Puritan Chemicals of Knoxville, Tennessee, in which he was informed that the price at which Puritan was selling muriatic acid to Cox Chemical’s Tulsa plant in Oklahoma was raised from $97.50 to $132.50 per net ton effective July 1, 2015. Although Mr. Todd had been aware of talk in trade circles about an expected sharp increase in demand for the chemical in the Tulsa region due to stepped up buying by steel mills, he considered the price change “unjustified, arbitrary, and unacceptable.” The director of purchasing observed:

Puritan has been an important customer of Cox Chemical for some years. Frankly, we might have swallowed a price boost of say $10-15 per ton, but pushing it to $132.50 per ton is outrageous. We have no choice but to reject the increase completely and with determination.

Cox Chemical’s Tulsa plant was depending on Puritan as the sole source of supply for the acid under an annual contract covering the year 2015.

Company Background

Cox Chemical Products produced commodity chemicals, chemical intermediaries, and specialities. Over 95% of the company’s 700 odd products were sold primarily to industrial markets both in the United States and abroad. Sales were over $1.2 billion in 2014 with net profits after taxes amounting to over $60 million.

Commodity chemicals, sold principally to other large chemical producers, such as Puritan, accounted for approximately 40% of sales in 2014. Products included alcohols, benzenes, chloroform, camphor, esters, ketones, purines, phenols, acetate and oxalic acids, caustic soda and potash, amines, and ammonia. In addition to other chemical companies, Cox Chemical’s customers for commodity chemicals included petroleum companies, food processors, pulp and paper manufacturers, textile companies, and steel mills.

Muriatic Acid[pic 1]

Cox Chemical’s Tulsa plant used muriatic acid, 20” Baume (31.45% HC1) for purification of NaCl brines fed to electrolytic cells. This application called for a low concentration of heavy metals, iron and other impurities. Strict and consistent adherence to specifications was important for the prevention of improper cell operation and also for storage in rubber-lined equipment. The Tulsa plant preferred to purchase the material as “prime acid” rather than as a by-product of ethyl silicate.

Cox Chemical—Puritan Relationships

Cox Chemical and Puritan Chemicals had been buying from and selling to each other a variety of commodity chemicals for a number of years. Thus, for example, in 2010 Puritan had bought from Cox commodity chemicals amounting to $8.2 million, while Cox had placed orders with Puritan totaling $4.4 million. Between 2010 and 2014 this balance had changed as Cox doubled its purchases from Puritan to reach a total of $8.95 million, whereas the latter firm’s purchases from Cox had increased during the same period from $8.2 million to a total of $12.4 million by 2014. Of the two companies, Puritan was by far the larger one, with sales of $9 billion and net earnings after taxes of $394 million in 2014. Puritan employed approximately 74,000 persons in over 60 domestic and overseas plants.