Asia caustic soda seen stable-to-firm; supply to stay tight

SINGAPORE (ICIS)–Caustic soda prices in Asia are expected to be stable-to-firm in the near term due to continued tightness in spot cargo supply in the region.

“We do not know how long this uptrend situation will continue, and it is already very bad luck to us as caustic soda buyers,” a southeast Asia-based buyer said.

On 15 September, caustic soda prices were assessed at $500-510/dmt (dry metric tonne) FOB (free on board) NE (northeast) Asia and at $530-540/dmt CFR (cost and freight) SE (southeast) Asia, up by at least $15/dmt from the previous week, according to ICIS data.

Prices have surged by 18-22% since 6 January 2017, based on the data.

“[Caustic soda] Price has gone up since the beginning of the year. Let’s see how long that [uptrend] will take and what price ceiling it will hit,” a trader said.

Buyers in southeast Asia are worrying about the price and availability of November-lifting cargoes from northeast Asia.

Export offers from China have dried up since last week as prices in its domestic market surged amid tight supply and the appreciation of the Chinese yuan against the US dollar.

China is the largest exporter of caustic soda in northeast Asia.

Chinese chlor-alkali plants are running at reduced capacity due to poor margins for chlorine – the co-product of caustic soda – and amid stringent environmental inspections of domestic factories.

In the eastern Shandong province, a number of chlor-alkali producers were heard to be running around 60% of capacity or lower, according to market sources.

Chinese plants may continue to run at reduced capacity going into the winter season as the environmental checks at chemical plants are continuing, and with a major political gathering scheduled in Beijing next month, market sources said.

Environmental and security checks will again kick into high gear in Beijing, which is hosting the 19th National Congress of the Communist Party of China for a week from 18 October.

In areas surrounding the Chinese capital, including Tianjin, which houses some of the major Chinese caustic soda producers like Tianjin Dagu, plant operating rates are expected to be low.

Meanwhile, price support is also strong on the demand side in China, with alumina producers, the major buyers of caustic soda, “fighting” to secure cargoes of raw material amid the tight market, industry sources said.

On 19 September, domestic 48-50% liquid caustic soda price was heard around Chinese yuan (CNY) 1,830-1,860/tonne EXW (ex-works), up CNY100/tonne from last week.

Chinese caustic soda producers have also been quoting higher export prices as the Chinese yuan continued to strengthen against the US dollar and amid robust overall demand worldwide for the material, market sources said.

Meanwhile, South Korea and Japan will not have much spot availabilities up to the end of the year, according to market sources. They are currently prioritizing their contractual obligations.

In South Korea, supply will further tighten as Lotte Fine Chemical has a scheduled turnaround at two of its three caustic soda lines in Ulsan on 28 October to 28 November. The lines to be shut have a combined capacity of 210,000 dmt/year.

Focus article by Patrick Han

($1 = CNY6.57)

Pictured above: Smoke billows from chimneys at a chemical factory in Tianjin, China. (Source: VIEW CHINA PHOTO/REX/Shutterstock)