Our Caustic Soda reports are published weekly in Asia, China, Europe, Latin America and the US, giving industry participants a truly global view of market movements.
There are solid and liquid spot quotations, depending on the region, and market news including information on shipping, international trade, upstream and downstream movements, as well as production issues. This analysis and intelligence equips you with the information you need to make vital business assessments.
Updated to Q4 2019
Integrated chlor-alkali producers continued their high operating rates in order to feed caustic soda’s co-product chlorine into the production of polyvinyl chloride (PVC). Since the electrolysis of brine produces caustic soda and chlorine in a fixed 1.1:1 ratio, the influx of caustic soda added to the supply overhang in the region.
Slowing global economic growth caused by the US-China trade war weighed on regional sentiment. With caustic soda seeing diverse end-use in the manufacture of pulp and paper products, alumina, soap, water treatment and textiles, decelerating growth worldwide adversely affected downstream demand, especially in the alumina sector.
European caustic soda supply tightened in the fourth quarter because of production issues and reduced capacity utilisation. Dow’s Stade plant began to suffer technical difficulties in November, while strikes in France reduced production and delayed deliveries in December. On top of that, more than one producer reduced caustic/chlorine production due to market reasons. Iberia saw the opposite trend because of capacity increases and greater imports from northwest Europe.
European caustic soda demand fell in the fourth quarter. Caustic soda consumption in the pulp and paper industry in the Nordic countries fell because of the weaker European economy. Players also saw an increase in the substitution of European product with imports. Demand fell in November and December in line with seasonal trends and destocking, with buyers reluctant to make purchases ahead of the year end.
Caustic soda supply in Latin America during the fourth quarter 2019 was abundant. Caustic soda demand from Brazil’s alumina refiner Alunorte slightly improved as the company raised operating rates to about 80% of capacity since local authorities lifted restrictions due to concerns about environmental contamination. Availability was ample despite the salt extraction halt in Alagoas that resulted in shortage of brine and reduced caustic soda production. Shipments of US product to Brazil were frequent.
Caustic soda demand in Latin America during the fourth quarter 2019 was sluggish due to oversupply, except for the May-July period when subsidence at the Alagoas salt mine resulted in shortage of brine and buyers tried to find alternative suppliers. Demand in Argentina was weak on the country’s economic and political issues, high inflation and currency devaluation. Demand in Mexico was moderate, but large availability from the US created a strong competitive environment.
Fourth quarter supply dipped slightly on planned maintenance activity after a period of long supply during the second and third quarters. While the seasonal decline in supply helped reduce inventory, the quarter ended with ample supply to meet market demand and prices remained weak through the quarter. The supply overhang held due to weaker demand from the alumina and pulp and paper end-use sectors, trends that continued through the quarter.
Weak performance in important end-use sectors, low oil prices and reduced manufacturing activity in the US and globally all weighed on demand during the fourth quarter of 2019. Low aluminium prices and reduced operating rates and plant closures among pulp and paper mills provided the sharpest demand declines in those weakened industries. Slower demand in Latin American economies weakened US exports to South America, the most important market for US offshore sales.
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Caustic soda, with its co-product chlorine, is produced via an electrolysis of brine, in the ratio of one part chlorine to 1.1 parts caustic soda.
Caustic soda is a white, deliquescent solid in various forms with no odour. It is very soluble in ethyl alcohol and water. It is a strong base, reacts violently with acid and is corrosive in moist air to metals like zinc, aluminium, tin and lead forming a combustible/explosive gas (hydrogen). It rapidly absorbs carbon dioxide and water from air while contact with moisture or water may generate heat.
Its main uses are 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, glass making and others.
The production of alumina from bauxite is a major end-use application for caustic soda.
Caustic soda is a basic feedstock in the manufacture of a wide range of chemicals. It is used as an intermediate and a reactant in processes that produce solvents, plastics, synthetic fibres, bleach, adhesives, coatings, herbicides, dyes, inks and pharmaceuticals.
Other uses include the saponification or conversion of fat, tallow and vegetable oils in soap manufacture, and in the manufacture of surfactants for detergents. It is used in the petroleum and natural gas industries to remove acidic materials from hydrocarbons and off-gases. In the textile sector, it is used in the chemical processing of cotton and the dyeing of synthetic fibres.
Chlor alkali production in the US and Brazil
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It has been a tough period for chlor-alkali producers as recent months showed a sharp downturn in margins for caustic soda. This scenario threatens to bring to an end the period of strong margins, despite some signs of a limited rebound earlier in Q4 2019. Across all major markets, calculated margins based on the co-production of caustic soda and ethylene dichloride (EDC) have weakened substantially since October 2018.
Like many others, if you are looking for ways to unveil answers to key industry questions then come and join us at the 24th World Chlor-alkali Conference organised by ICIS and Tecnon Orbichem. This 1.5 day event has been a home for key industry players in the value chain, having welcomed hundreds of delegates each year. Take a first look at the key offerings in 2020.