Chemical profile: US caustic soda

12 April 2013 09:58  [Source: ICB]

USES

US caustic sodaCaustic soda (sodium hydroxide) is mainly used in the manufacture of pulp and paper, alumina, soap and detergents, petroleum products and chemical production. Other applications include water treatment, food, textiles, metal processing, mining and glass-making.

SUPPLY/DEMAND

The caustic soda market in the US was assessed as being in flux in the week ended March 29. Producers, who struggled throughout 2012 to implement price increases, say demand for caustic soda remains healthy across most, if not all, consumer segments.

But many buyers of caustic soda, particularly the key alumina producers - the single largest consuming sector - say their own demand is dampened in an atmosphere of world economic uncertainty. In 2012, several large alumina producers curtailed operations.

At the International Petrochemicals Conference (IPC) in late March, hosted by the American Fuels & Petrochemicals Manufacturers in San Antonio, Texas, US, sentiment about the market was mixed among participants.

While producers maintain demand is healthy and supply is snug, many buyers said there is more material available than suggested by producers. At least one trader was forced to sell a cargo at a substantial loss in northern Europe when it could not find a buyer in the Mediterranean, where the cargo was originally bound, sources said.

The Latin American caustic soda market was gauged as stable, with participants away from their posts in the end of a holiday-shortened week that ended on March 29. Market activity was dampened and discussion muted during the Easter holiday.

Demand in 2013 in Latin America has been healthy across the board from key consuming industries, with the trend expected to continue through the year, according to sources. Availability is finely balanced with demand, although a pocket of tightness remains in Brazil because of production issues that arose after a power blackout in November 2012.

Still gauged as snug, the market in Brazil has been easing as plants normalise production and as substantial import volumes arrive. Demand is healthy and rising from paper/pulp and detergents, but business from alumina remains soft, sources said.

Alumina production across the globe is being rationalised, as old-technology plants using expensive forms of energy are closing. New production will include cheaper energy sources such as hydroelectric power in Siberia, Russia; and natural gas in the Middle East and North America, sources said.

PRICES

Following a 2012 in which producers had difficulty implementing price increases amid continuing macroeconomic turmoil, major US producers in late February announced a new round of price increase initiatves of between $30/dst (dry short ton) and $50/dst, effective April 1 or as contracts allow.

Producers cited continuing tightness in supply, caused by a set of planned and unplanned ouages and a drop in operating rates in January after a robust December.

US caustic sodaOperating rates moved up slightly in February, but not enough to offset the earlier drop-off.

One producer said it has begun to have some success implementing its increase with some accounts within the range of the announcements. Buyers counter that availability is not as tight as producers maintain.

Material is said to still be tight on the East coast, where there are few shipments coming from Europe. The West coast is seeing more imports from Asia, where pricing had softened on lowered demand.

TECHNOLOGY

Nearly all caustic soda is made by the electrolysis of sodium chloride solution using either mercury, diaphragm or membrane cells. This process produces 2.25 tonnes of 50% caustic soda with each tonne of chlorine. The main production route in the US is via the diaphragm cell.

OUTLOOK

The outlook for caustic soda prices remains mixed. Much depends on whether and by how much the US home construction industry rebounds in 2013, as production of caustic soda is intrisically tied to the production of chlorine, used in polyvinyl chloride (PVC) and other vinyl products that are extensively used in homebuilding. As more caustic soda is produced, the tightness in suppy may be alleviated, creating downward pressure on pricing.


By: Ken Fountain



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