FocusCaustic soda imports in Brazil are drying up

23 May 2008 19:22  [Source: ICIS news]

By Greg Holt

 

HOUSTON (ICIS news)--The availability of imported caustic soda in Brazil is quickly evaporating, and producers and traders said on Friday that they are unsure where to find enough material to meet Brazil’s enormous local demand.

 

Brazil’s booming alumina and pulp-and-paper industries are key contributors to the rapidly developing Brazilian economy. Yet these industries consume caustic soda at levels far greater than what is produced domestically, and as a result they have become dependant on imports to maintain production growth.

 

Most of those imports were previously shipped from the US. But since a US housing market crisis drove down construction activity and, with it, demand for construction materials made from the caustic soda co-product chlorine, US chlor-alkali production has fallen precipitously to its lowest level in more than two years.

 

Consequently, US caustic soda producers have struggled to meet contractual supply obligations, and producers and traders said surplus material that previously was shipped to Brazil has totally dried up.

 

“If the situation doesn’t change, we will see supply vanish and importers will run out of material,” a chlor-alkali producer in Brazil said. “Brazil is supplied for the moment, but without imports it will get very, very tight.”

 

China is also typically a major exporter of caustic soda to Brazil, but the unlikely combination of this year’s Summer Olympics in Beijing and the earthquake that rocked central China earlier this month has seriously hampered chlor-alkali production, and exports have seen a sharp downturn.

 

Sources said several chlor-alkali plants located within 500 km of Beijing - along with many other production facilities - have been shut down under government order to help improve the capital’s air quality until the Olympic Games end in late August.

 

Other plants in cities across China, including a 110,000 tonne/year chlor-alkali plant in the eastern Zhejiang province, will be shut down while the Olympic Torch passes through. Moreover, the transportation of caustic soda on highways in those cities has been banned for the duration of the torch relay, sources in China said.

 

Although many of the Chinese industries that buy caustic soda also will have to shut down their production facilities, an importer of caustic soda in Brazil said the net effect has been a decline in available supply for shipment to the Western Hemisphere.

 

“The billion dollar question is: what is the balance? But there have been many outages and we’re not seeing any material coming out of Asia,” the importer said.

 

Sources in China said the four chlor-alkali producers in Sichuan - where the 12 May earthquake was centered - have either shut their plants down due to safety precautions or reduced their operating rates.  The four facilities have a combined annual capacity of 900,000 tonnes.

 

The plants were not a major source of export material due to their distance from the coast, but traders said the earthquake has made it more difficult to gather together a large enough parcel to justify the trans-Pacific freight cost.

 

Brazil even is losing the support of its neighbours. Solvay, the largest chlor-alkali producer in Argentina, stopped exporting caustic soda to Brazil during the first quarter and has since redirected the 3,000 tonnes normally shipped to Brazil every month to a new pulp-and-paper plant in Uruguay, sources said.

 

Meanwhile, producers and traders said the availability of caustic soda exports to Brazil from Western Europe has vanished, and while the Middle East is a major chlor-alkali producing region, producers there are committed to supplying Australia’s enormous alumina industry.

 

Most recently, traders have shipped material to Brazil from Romania and Egypt, but market sources agreed that such unlikely suppliers would not be able to meet Brazil’s demand for caustic soda for very long.

 

Still, producers in Brazil were optimistic that alumina and pulp-and-paper producers would not have to dramatically scale-back production. Rather, they predicted that import prices would increase to levels that continued to give producers tremendous incentive to ship any available material to Brazil.

 

Caustic soda import prices in Brazil were assessed last week at a $600-660/DMT (dry metric tonne) CFR (cost and freight) range, according to global chemical market intelligence service ICIS pricing, but market sources said deals this week chiefly were concluded in the top end of that range and would continue to push higher.

 

Meanwhile, local Brazilian producers said domestic prices would rise to at least $750-800/DMT ex-tank in June.

 

Caustic soda producers in Brazil include Carbocloro, Dow Chemical, Solvay, Braskem, PanAmericana, Aracruz, and Canexus.

 

For more on caustic soda visit ICIS chemical intelligence

 

To discuss issues facing the chemical industry go to ICIS connect

By: Greg Holt
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly