Latin American caustic soda demand improves amid mixed pricing

Author: Luly Stephens


HOUSTON (ICIS)---Latin American caustic soda demand is slowly improving amid mixed prices - largely influenced by supply levels - and attractive offshore offers.

As caustic soda supply in other regions is becoming more abundant, weakening the price of international offers. Latin American buyers are seeing a wide range of options from $180-250/dry metric tonnes (dmt) FOB (free on board) main port, depending on volume.

These low values are exerting downward pressure on domestic product prices, except in Argentina where imports are rare.

Prices for offshore product could further decline once the two US force majeure declarations and a planned turnaround at chlor-alkali facilities are over and product becomes more available in the market.

Meanwhile, Brazil’s alumina refiner Alunorte continues to ramp up production since mid-October from reduced capacity of 35-45%, increasing caustic soda import volumes in the fourth quarter.

Brazil's caustic soda production has been reduced since Braskem stopped production at its Alagoas chlor-alkali facility following the subsidence of the salt mine in May 2019, making many local buyers dependent on imports. Although the Alagoas production was expected to restart in the fourth quarter 2020, no updates have emerged to confirm the date.

According to the country’s association of chlor-alkali industries Abiclor, Brazil’s year-to-date caustic soda production in January-August 2020 decreased from the same period in 2019 by 17.5% to 547,051 dmt.

The greatest consumption volumes were seen in the paper/cellulose sector.

YTD Caustic Soda Consumption (dmt)

The decline in domestic production has led to sustained import volumes, particularly from the US.

Source: ICIS Supply & Demand Database

The situation is different in Argentina, where recent reduced production has resulted in tight supply in October, supporting higher prices.

Market participants believe supply will continue to be tight through November and possibly part of December.

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In Mexico, cheaply priced imports continue to compete against domestic product, making the implementation of any firmer price initiatives difficult despite improving demand from several downstream segments.

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Import volumes of caustic soda continue to climb through the years as shown in the graph sourced from the ICIS Supply & Demand Database.

In countries along the Pacific coast of South America, buying interest is sluggish as a direct impact of the spread of the pandemic that has caused a slowdown in the region.

In Peru, domestic and export prices have been stable amid sustained demand, especially for exports. Large export volumes continue to flow to Paranagua, Brazil as competition is less intense there than in other Brazilian areas such as Santos near Sao Paulo state.

In Chile, prices have been trending down due to the influence of lower offshore offers, with most prices for mid-size buyers heard at $250/dmt FOB main port.

“Consumption [of caustic soda] in several industries has slowed due to the impact of the pandemic. However, consumption from cells and mining sectors has been stable and does not appear to have been impacted by the pandemic,” a local distributor said.

The dynamics of the Latin American caustic soda market in 2020 has been unpredictable, significantly influenced by the pandemic and the economic situation of each country.

Demand became robust following the outbreak of the coronavirus as end-consumers and governments intensified efforts to fight contagion by consuming larger volumes of cleaning products derived from caustic soda or caustic soda itself for applications such as water treatment plants.

Economic woes in the region - worsened by quarantine measures - along with ample offshore product availability at competitive prices have caused variations in regional demand and pricing.

Caustic soda is used in the manufacture of pulp and paper products, alumina, soap, water treatment and textiles.

Caustic soda producers in the Americas are Oxychem, Olin Corp., Westlake Chemical, Shintech, Formosa Plastics, Unipar Indupa, Unipar Carbocloro, Braskem, Vestolit and Quimpac.

Visit the ICIS coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

Focus article by Luly Stephens

Thumbnail image shows caustic soda. Source: Shutterstock