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 Q2 2020
Coronavirus-related lockdowns resulted in limited manpower and also curbed downstream demand. This led many producers in the region to lower their operating rates in early Q2. Producers, mainly from Japan and South Korea, also conducted seasonal turnarounds during the quarter. Nevertheless, the sluggish recovery in China’s domestic markets prompted Chinese producers to turn to the export markets.
Demand remained weak for much of Q2 amid lockdowns in many Asian countries. In April, some arbitrage trade for Asian cargoes emerged from the US West Coast. But at the same time, many liquid chemical vessels switched over to ferrying clean petroleum products instead, leading to limited tank space. June saw various Asian countries lifting their lockdowns, but demand continued to be outweighed by supply.
European caustic soda availability fell in Q2 as demand for co-product chlorine was lower. The coronavirus pandemic reduced consumption in the construction and automobile industries, which are important downstream markets for chlorine. Eurochlor statistics showed that chloralkali utilisation rates fell to 73.7% in April, down 10% compared to the previous year, and remained at a similar level in May. Spot and contract prices trended upwards during the quarter as a result.
European caustic soda demand fell for many applications in Q2, although this was outweighed by increased stockpiling. The economic effects of the coronavirus reduced consumption in the downstream pulp and paper and chemical industries. However, consumption rose in the short term in the food and hygiene industries as consumers stockpiled material, although this tapered off towards the end of the quarter. Trends were therefore mixed and dependent on the industry involved.
Q2 supply was still long amid slow demand, but an uptick in demand was noted as countries needed caustic soda to produce bleach and soap to fight the coronavirus pandemic. As a result, prices strengthened particularly in international markets while domestic prices in most producing countries remained almost flat, with the exception of Brazil since the country relies heavily on imports from the US.
Q2 demand started sluggish on ample supply, but demand increased from late March through May as countries fought to prevent the spread of the coronavirus via production of bleach and soap. Late in the quarter, however, demand started to decline as weak economies deteriorated further due to quarantine measures.
US chlor-alkali producers slashed production rates in April to an effective operating rate of 68%, the lowest rate of at least the past seven years. The production reduction was based on the decline of demand for caustic soda’s co-product, chlorine. The sharp cutoff sent supplies tight within a couple of weeks where it stayed through the quarter. Production rates for May rose to a mere 75%, the second-lowest rate of the past seven years. The quarter ended with some return to stabilisation, but tight supply remained.
Second quarter demand also declined, particularly to pulp and paper manufacturing and to oil refineries and chemical processing purposes. Demand for water treatment, alumina refining and other industrial uses remained fairly steady, though slightly lower during the coronavirus lockdowns and retraction of general business activity. The demand decline remained slower than the cutbacks in production and resulting supply.
We offer the following regional Caustic soda analysis and news coverage to keep you informed of factors and developments affecting prices in the Caustic soda marketplace.
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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
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.