The caustic-chlorine dilemma

Indian demand for caustic soda has been steadily expanding thanks to the alumina sector but investments in new chlor-alkali facilities are being held back by limited demand growth for chlorine.

As is usually the case, India’s low per capita consumption suggests immense opportunity for growth. India’s per capita chlorine consumption is only around 1.85 kg as against China’s 13 kg. This figure can grow only if the industry invests heavily in vinyls – the key end use market for chlorine.

Globally, around 39% of chlorine finds it way to the vinyls chain. The other big end-uses are isocynates and propylene oxide.

India imports around 400,000 tonnes of PVC annually but except for Chemplast Sanmar’s new plant due this year, no new investments have been announced. A big headache for prospective investors is securing ethylene at the right price.

The local market for many of the other end-uses is still too small to support worldscale investments. And unfortunately India has not been able to build a chlor-alkali hub which would link all chlrine users along the lines of what has been developed in Geismar, US, or Botlek in the Netherlands.

I think one Indian site that has the potential to develop as a chlorine hub is Dahej where Gujarat Alkali and Chemicals Ltd (GACL) plans to link its chlor-alkali facility with an investment in chloromethane in joint venture with Dow Chemical. Reliance Industries already has a cracker at the site and ONGC is planning one which should have ethylene to spare for a vinyls unit. All that is needed is to bring in a few more investors to complete the chlorine chain. Other chlor-alkali facilities at the site include one operated by Reliance Industries and a second being built by Meghmani Organics.

At last week’s one-day seminar on chlorine derivatives organised by the Alkali Manufacturers’ Association of India (AMAI), there were plenty of fancy charts and optimistic growth projections. But it was hard to detect any serious commitment towards new investments.

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