INSIGHT: Chlorum sees US as next market for its small chlor-alkali plants
HOUSTON (ICIS)–The chlor-alkali firm Chlorum Solutions sees the US as the next market where it can bring its model of developing small regional chlor-alkali plants to serve customers eager to avoid the trouble and expense of shipping chlorine over long distances.
- The danger and difficulty of shipping liquefied chlorine gas has made it more attractive for customers to rely on small nearby chlor-alkali plants. Recent disruptions have made the model even more attractive
- Chlorum has spent eight years building and operating its small modular plants in Brazil and Uruguay. The capacity of these plants do not exceed 45 tonnes/day, with the exception of a unit that was acquired
- Chlorum plans to open an office in the US early next year.
RATIONALE FOR SMALL
From the time it started up its first plant in 2014, Chlorum’s strategy has been to serve secondary markets that were far from the world-scale petrochemical hubs that produce chlorine and caustic soda, said Daniel Croce, president and co-founder of the company. He made his comments during an interview with ICIS.
Chlorum does not intend to compete head-to-head with large chlorine producers, Croce said. “Our thesis is to bring a value-added solution to a niche segment of the market.”
Chlorine is not a safe substance to ship over long distances. While the probability of an accident is extremely low, a growing number of companies do not want to risk the chance of even a single spill.
Safety is one of the main reasons why companies are interested in Chlorum’s on-site plants, Croce said.
In Brazil, these challenges are magnified by the country’s heavy reliance on trucks to ship goods.
In 2014, Chlorum built its first small-scale chlor-alkali plant in Fortaleza, Ceara state, a city in northeastern Brazil. It serves a water-purification plant.
ARGUMENT GROWS STRONGER FOR ONSITE
In addition to safety, reliability has become a growing concern for chlorine customers.
For more than a decade, companies has contended with a growing number of disruptions that have made it more difficult for them to get their raw materials on time. Not all of them had affected chlorine consumers, but they all illustrate the fragility of the world’s supply chains.
- In 2011, the Fukushima earthquake in Japan shut down a nearby plant that was the only one in the world that produced Xirallic, a paint pigment used in the auto industry, according to the Wall Street Journal
- In 2012, a plant shut down that produced a precursor to nylon 12. That precursor had only three suppliers and the shutdown of the plant threatened automobile production around the world
- In 2018, a nationwide trucker strike in Brazil disrupted petrochemical production and slowed down the nation’s economy. The water purification plant in Fortaleza was never close to having a supply issue because of the Chlorum chlor-alkali plant
- In 2019, the US and China imposed punitive tariffs on each of their imports, including many plastics and chemicals
- In 2020, the coronavirus pandemic caused disruptions around the world
- In 2021, winter storm Uri shut down petrochemical production on the US Gulf Coast
- In 2022, the war between Russia and Ukraine caused massive disruptions in food, energy, fertilizer and even oleochemicals supply
- Contentious contract negotiations between US labour unions and railroad companies raised the threat of a strike. In the US, chemical railcar loadings represent about 20% of chemical transportation by tonnage
“We’ve very much gotten addicted to just-in-time,” Croce said. The problem is that any hiccup can have global repercussions.
“Companies are not prepared. They don’t have resilient supply chains,” he said. “We’re really looking at addressing today’s issues.”
PHASING OUT MERCURY-CELL
Chlorum is seeing another opportunity as countries phase out chlor-alkali plants that rely on mercury-cell technology.
Brazil and Uruguay both ratified the Minamata Convention on Mercury, and they will end mercury-cell production in 2025, Croce said.
Uruguay’s sole chlor-alkali relies on mercury-cell technology. Seeing an opening, Chlorum built its second plant in Canelones, Uruguay in 2017 and expanded it In 2020.
GOING BIG BY GOING
Chlorum since expanded in Brazil.
- The company built its third plant in Codo, Maranhao state in northern Brazil
- The company recently signed
a management agreement with Cape
Acquisitions, a company that bought the South
American chemicals business of Compass
Minerals in April 2022
For Chlorum, the main part of that acquisition is the chlor-alkali site in Igarassu, Pernambuco state. Out of the plant’s 125 tonnes/day of output, two-third is mercury-cell based and one-third is membrane based. The company plans to convert the plant before the 2025 Minamata Convention deadline
- Early in 2023, Chlorum plans to commission a plant outside of Salvador in the Brazilian state of Bahia
- In Q2 2024, Chlorum plans to start up a plant in Uberlandia, Minas Gerais state
- In Q2 2024, the company plans to start up another chlor-alkali plant in Santa Catarina state. Chlorum has not disclosed the specific site
Because Chlorum’s plants are small, they produce smaller amounts of waste and are easier to manage, Croce said. In Uruguay, local companies are using sludge derived from the brine treatment process to make bricks.
In Brazil’s Maranhao state, Chlorum sells brine purge to local detergent manufacturers.
Being small also makes it easier for Chlorum to use renewable energy. All of Chlorum’s plants rely solely on renewable power with the exception of the former Compass plant in Pernambuco state, Croce said. In 2020 and 2021, the company was carbon neutral.
CHLORUM EYES US
Chlorum is considering a significant expansion in the US, where its model of regional production could succeed in another continental market with concentrated production.
The states of Texas and Louisiana have 78% of the nation’s chlorine capacity, according to the ICIS Supply & Demand Database. Add Alabama, and the total rises to 82%.
Such concentration of production has left more distant US states vulnerable to supply disruptions. Earlier this decade, the city of Portland in the US state of Oregon issued an advisory about a chlorine shortage.
The long distances between suppliers and customers are being aggravated by what the chemical industry has described as poor service from railroad companies.
Meanwhile, companies have been reducing capacity in the US.
In 2021, US chlorine production was nearly 2% below levels from 2015, according to the ICIS Supply & Demand Database. ICIS forecasts chlorine capacity will fall again in 2023.
While chlorine capacity has declined, prices have risen. ICIS assessments for US quarterly chlorine contracts have increased by nearly 400% since the start of 2020 on a free-on-board (FOB) basis.
For Chlorum, the next step is to set up a US office, which should be ready by early next year, Croce said.
Insight by Al Greenwood
Thumbnail shows a cup containing water, which is treated with chlorine-based chemicals. Image by Al Greenwood.
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