Chlorine is used in the manufacture of many different products including polyvinyl chloride (PVC), organic and inorganic chemicals, agrochemicals and pharmaceuticals as well as chemicals for water treatment and sterilisation.
The main end-product use of chlorine is PVC, via the intermediates ethylene dichloride (EDC) and vinyl chloride monomer (VCM). PVC consumption is mainly influenced by the construction industry and hence demand correlates closely with economic growth.
Chlorinated organic chemicals account for a large proportion of chlorine demand but this sector has seen slow or negative growth. One exception is phosgene which has been growing due to the increased production of polycarbonates and isocyanates used in polyurethanes.
In the inorganic chemicals category, chlorine is used in the manufacture of many diverse chemicals such as titanium dioxide, sodium and calcium hypochlorites and hydrogen chloride.
The chlorine industry has been under considerable environmental pressure for many years. The use of chlorine to bleach pulp and paper has been largely phased out in North America and West Europe due to environmental concerns. The phase-out of halogenated ozone-depleting materials is largely complete.
The supply of chlorine can be influenced by the caustic soda markets since a large proportion of chlorine is co-produced with caustic soda by the electrolysis of sodium chloride solution (1.0 tonne of chlorine manufactured results in the production of 1.1 tonnes of 100% caustic soda). However, these two products are consumed in quite different industries leading to a problem of balancing the demand on a chlor-alkali plant.
If caustic soda is in surplus, it can usually be stored as long as there is sufficient storage capacity available. But if chlorine is in surplus, it cannot be stored easily and is processed into one of chlorine's derivatives. If the markets for chlorine derivatives are already saturated, then production needs to be cut back.
This often leads to counter cyclicality in the market for the two products, for example, caustic soda becoming increasingly tight and prices escalating while chlorine moves into oversupply and prices collapse. However, if the combined market price of 1 tonne of chlorine and 1.1 tonnes of caustic soda (often called the electrochemical unit or ECU) is higher than the cost of production, chlor-alkali plants are economically viable.
The chlor-alkali market is influenced by economic growth with the result that profitability is cyclical. It is also indicative of the economic health of a particular region.
According to US-based consultants CMAI, 2006 was a year of stark contrast for the three key regions of the world. The North American market enjoyed high ECU margins above reinvestment levels in 2006. West European producers did relatively well although margins were not as good as their North American counterparts. In Northeast Asia, many integrated chlor-alkali/vinyls producers had the lowest ECU margins.
The high ECU margins in North America have been a result of tight supply/demand for chlorine and caustic soda. This region has seen considerably rationalisation of capacity with CMAI estimating the closure of 1.7m tonnes/year of chlorine capacity in the 2001-2006 period.
The closure of Dow Chemical’s chlor-alkali facilities in Fort Saskatchewan, Alberta, Canada in late 2006, with the removal of 450,000 tonnes/year of chlorine capacity, will largely balance out the capacity increase from Shintech’s new facilities in 2007 and 2008. North American operating rates are expected to remain relatively high through to 2011 due to limited capacity growth.
European chlorine production has been steady for the last three years, according to the industry association Euro Chlor. Chlorine production dipped slightly in 2006 to 10.30m tonnes compared to 10.38m tonnes in 2005 and the ten-year high of 10.40m tonnes in 2004. Capacity utilisation rates averaged 83% in 2006 compared to 85% in the previous year.
Germany was the largest chlorine producer in 2006, accounting for 43.6% of production, said Euro Chlor. France remained the second largest with 13.6% share and Belgium/the Netherlands third with 12.5%.
Margins for West Europe looked relatively flat when compared to the US, noted CMAI. A slight creep in capacity is expected due to planned expansions but a large green-field project is unlikely.
Asia’s growth in demand is expected to be strong because of China. The main growth is from the vinyls sector where the construction of acetylene-based PVC plants has fuelled growth of the local chlor-alkali industry.
According to CMAI, chlorine capacity in Northeast Asia is expected to double from 15m tonnes in 2001 to 31m tonnes by 2011. In the same period, China will raise its share of chlorine capacity from 53% to almost three-quarters of total Northeast Asian capacity.
China’s chlorine demand grew at more than its GDP which averaged 10%/year from 2001 to 2006, said CMAI. However, China’s chlorine demand is expected to moderate towards the end of the decade as the global economy slows down.
Integrated chlor-alkali/vinyls producers in Northeast Asia have suffered from poor ECU margins, in some cases negative, as a result of low chlorine values. CMAI expects ECU margins to recover towards the end of the decade when capacity expansions slow down and demand catches up with supply.
(Updated: March 2007. Sources: 2007 CMAI World Petrochemical Conference, 21-22 March 2007, Houston, Texas; ICBA Chemical Profile, 15 May 2006)
Chlorine
Process Technologies
Chlorine with its co-product caustic soda is manufactured primarily by the electrolysis of sodium chloride solutions. The primary raw material is common salt, usually in the form of underground deposits which are brought to the surface as a solution in a pumped high pressure water supply. The solution is often called brine. The electrolysis process produces 2.25 tonnes of 50% caustic soda with each tonne of chlorine.
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