Price and market trends: Global chlor-alkali sector set for modernisation

08 February 2013 10:07  [Source: ICB]

The global caustic soda market will go through significant changes over the next decade as new legislation enforces the conversion of chlor-alkali plants from the old mercury process to the more modern membrane-process in 140 countries.

UN flags Rex Features

Rex Features

United Nations measures will remove the mercury process by 2025

On 19 January 2013, the United Nation Environmental Program's (UNEP) Mercury Convention passed a set of legally binding measures which were accepted by more than 140 countries. Signatories of the convention agreed to a mandatory deadline for the phase-out of mercury cells, used in the production of chlorine, caustic soda and other chlor-alkali products, by 2025. An exception is the EU where the deadline is 2020.

ELECTRICITY CONSUMPTION

According to industry body Euro Chlor, of the three chlor-alkali processes, the mercury process uses the most electricity. As mercury is a hazardous substance, it also requires measures to prevent environmental disasters. In addition, at the end of the chlor-alkali process, mercury must be removed from the hydrogen gas and caustic soda solution.

In Europe, 42 mercury-based chlorine plants will need to be converted to more energy efficient non-mercury technology. The total cost of the conversion is estimated at more than €3bn ($4bn). Plants using the mercury process accounted for about 31.8% of European chlorine production in 2010. An alternative is the diaphragm cell process which accounted for about 14% of European chlorine output in 2010.

"By converting to the membrane technology, a mercury based production unit can save 25-30% of electricity, but this gain is partially offset by an increase in the steam consumption," said Jean-Pol Debelle from Cefic, the European Chemical Industry Council.

The closure of all these plants does not mean the global market will become tight, Debelle added.

"If done progressively it will not have a major impact. It is also happening is other parts of the world without a problem so we don't expect any major impact of the conversion process on the total installed production capacity," Debelle said.

In addition, there are several new plants coming on line globally in 2013 and in the run-up to 2025, which will balance the market.

OVERSUPPLY CONCERNS

Some sources expressed concern the new plants will make the market long. One caustic soda producer said that in 2013 the market will be "totally oversupplied" as downstream demand is shrinking and supply will increase by more than 1m tonnes in 2013.

Caustic soda

"Demand from the alumina sector in India and Australia is extremely poor as several plants have shut down and this will last through 2013," the producer said. It added that it expected further price decreases during the year as a result of the plant openings, weak demand and oversupplied market conditions.

DIFFERENT IDEAS

A second producer had a different opinion. "The opening of these new plants [will not make the market long] - perhaps in the short-term, but not in the long run because several of these [mercury-process] plants in Europe will have to close down or convert, which many companies cannot afford [so they will close down permanently]," the producer said.

Caustic soda prices have declined drastically since the end of last year, mainly driven by poor demand. Liquid caustic soda is at $290-300/dmt (dry metric tonne) FOB (free on board) NE (northeast) Asia, while in the Middle East it is around $300-340/dmt FOB Arabian Gulf.

In the US export prices are at $415-425/dmt FOB USG (US Gulf), while in Europe it is at $430-450/dmt FOB NWE (northwest Europe).

Caustic soda sales are mostly influenced by demand from the downstream soaps and detergents, alumina and pulp and paper industries. As a result of the global macroeconomic slowdown, demand for these products has dropped significantly, driven by falling output in the automotive and construction industries in particular.


By: Janos Gal
+44 208 652 3214



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