Chemtrade Logistics Income Fund TSE: CHE.UN executives said the company is navigating significant commodity price volatility, particularly in caustic soda, sulfur and aluminum, while continuing to pursue organic growth in water solutions and UltraPure products.
During the Q&A portion of the company’s first-quarter 2026 results call, Chief Executive Officer Scott Rook and Chief Financial Officer Rohit Bhardwaj addressed analyst questions on the company’s outlook, pricing assumptions, capital allocation priorities and operating developments, including its North Vancouver facility and the ramp-up of its UltraPure line in Cairo, Ohio.
North Vancouver chlorine issue remains under discussion
Rook said Chemtrade has been in “active negotiations” with the District of North Vancouver after a prior council decision related to the company’s proposal involving liquid chlorine production rights. He said Chemtrade modified its earlier proposal, though details had not yet been made public.
Rook said one issue addressed in the revised proposal related to comments made by the mayor at an April vote. According to Rook, the mayor had raised concern that the earlier approval would have given Chemtrade operating rights “in perpetuity” to produce liquid chlorine.
“That’s been a point that we have negotiated,” Rook said, adding that the district was expected to make the details public in about two weeks. He declined to comment further on the specific terms before their release.
Guidance maintained amid higher sulfur and aluminum costs
Bhardwaj said Chemtrade’s full-year adjusted EBITDA guidance of CAD 485 million to CAD 525 million incorporates higher sulfur and other input costs, including aluminum. He noted that water solutions has seasonality, with the middle quarters typically stronger and the third quarter usually the strongest.
When asked what steady-state EBITDA for water solutions could look like after higher sulfur input costs are passed through customer contracts, Bhardwaj declined to provide a specific run rate. He said the company would have a better sense as the year progresses.
Rook said forecasting has become more challenging, with caustic soda representing the largest uncertainty for Chemtrade. He said the company is relying on market experts for caustic soda assumptions.
For the acid business, Rook said demand for regeneration services is strong and pricing is also strong. He said the company’s merchant acid business typically benefits when sulfur prices rise because Chemtrade is able to recover costs and expand margins. However, he added that timing any decline in sulfur prices remains difficult.
In water, Rook said the integration of Polytec is going smoothly and organic growth projects are progressing well. At the same time, he said the business is facing “a bit of a headwind” from sharply higher sulfur and aluminum costs. Because many prices are governed by annual contracts that roll on and off throughout the year, Chemtrade is actively repricing materials with customers, he said.
Caustic soda market volatility complicates outlook
Executives spent much of the call discussing caustic soda pricing, which Rook described as highly volatile. He said Northeast Asia caustic soda prices averaged about CAD 350 per ton in the first quarter, roughly CAD 100 below the company’s assumption for the year. As the Middle East conflict progressed, prices in Asia jumped by about CAD 200 per ton to CAD 550, before some deals were later done again near CAD 350, which Rook said was a surprise to many market participants.
Rook also said China appears to have increased coal-based PVC production, with caustic soda produced as a byproduct. In addition, he said Chemtrade understands that the Korean government has provided subsidies to support its PVC producers and chlor-alkali industry as Korea and Taiwan face strains tied to natural gas availability from the Middle East.
Bhardwaj said the company’s guidance assumes a Northeast Asia index of about $415 for the year. Because Chemtrade prices caustic with roughly a one-quarter lag, that implies the company expects the rest of the year to remain broadly in line with current levels, near the CAD 450 mark.
Rook said both CMA and Argus expect caustic soda prices to be about CAD 200 higher by 2028 than they are currently, though he cautioned that the timing of any move higher would be difficult to predict.
Sulfur surge has mixed effects across segments
Bhardwaj said higher sulfur prices have different implications across Chemtrade’s segments. In the acid segment, higher sulfur provides a slight benefit. In water solutions, the effect depends on how quickly prices move.
“If it spikes up very quickly, then it’s hard for us to pass that through in real time,” Bhardwaj said, noting that there can be a lag. He added that when sulfur prices moderate, Chemtrade can benefit on the back end, and over a full cycle the company expects to “come out okay and maybe a little bit ahead.”
Bhardwaj said sulfur is currently close to, if not at, an all-time high. Historically, he said sulfur spikes have generally been short-lived, often lasting about two quarters before declining rapidly. This time, he said, the situation is different because sulfur had already started to rise before the Middle East conflict, and about 20% of global sulfur moves through the Strait of Hormuz.
He said industry experts expect some moderation in the second half of the year, though prices are still expected to remain well above historical levels.
UltraPure ramp and chlorine demand show progress
Rook said Chemtrade is pleased with the progress of its UltraPure line in Cairo, Ohio. He said the company will sell to two major fabs this year, including for advanced node applications, and is continuing to work with two other fabs. The plant was built to achieve the quality required for advanced node customers, he said.
“We’ll be filling up that line over the next couple of years,” Rook said, adding that he expects “pretty rapid pickup” over the next 12 months.
On chlorine, Rook said demand has improved for seasonal reasons and because of increased U.S. PVC demand related to the Middle East crisis. He said summer typically brings stronger chlorine demand for water treatment as snow and rain runoff increases, and as pools are prepared. He also said higher PVC demand in the U.S. and exports to Asia and other regions are creating additional chlorine demand.
Bhardwaj cautioned that Chemtrade’s 2026 guidance assumes weaker chlorine and hydrochloric acid pricing versus last year. He said the company expects its MECU netbacks, which combine chlorine, HCl and caustic, to be CAD 195 lower than last year, while the Northeast Asia caustic assumption is down only $20 year over year. The difference is driven by chlorine and HCl, he said.
On capital allocation, Rook said Chemtrade will continue to prioritize its distribution, organic growth spending and its normal course issuer bid while it believes its units are undervalued. He reiterated a long-term target to reduce the unit count to roughly 100 million units. The company also intends to continue investing in organic growth, primarily in water solutions, with some potential additional spending in UltraPure.
Rook said Chemtrade’s recent acquisitions are being integrated and that the company’s goal is to bring leverage back down before pursuing another acquisition. He said the company has a pipeline of opportunities, “pretty much all in water,” but does not see anything significant on the horizon for this year.
Bhardwaj said Chemtrade’s leverage target is 2.5 times or lower, and that the company is currently around that level. He added that Chemtrade has no intention of raising equity while it believes its units are undervalued, which limits the size of potential transactions.
About Chemtrade Logistics Income Fund TSE: CHE.UN
Chemtrade Logistics Income Fund provides industrial chemicals and services to customers in North America and around the world. The company organized into four main operating segments: Sulphur Products and Performance Chemicals (SPPC), Water Solutions and Specialty Chemicals (WSSC), Electrochemicals, and Corporate. It generates maximum revenue from Electrochemicals segment. Chemtrade operates in Canada, the United States, and South America of which maximum revenue comes from the United States. SPPC markets, remove and produces merchant, regenerated and ultra-pure sulphuric acid, liquid sulphur dioxide, sodium hydrosulfite and provides other processing services.
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