Caustic soda (sodium hydroxide) is used 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 and glass-making.
Views on European liquid caustic demand are mixed. Demand in northwest Europe and particularly in the downstream surfactants and chemical intermediate sectors have been robust, as they have been less affected by economic and seasonal fluctuations.
Some players maintain that caustic soda demand from the aluminia/aluminium sector continues to suffer from economic constraints, although exposure in Europe is not seen to be as significant relative to other regions.
Performance in the downstream pulp and paper industry continues to vary, depending on region. In the Nordic countries, demand has held up reasonably well, while parts of the Mediterranean, such as Spain, have been more negatively affected.
Liquid caustic soda supply was plentiful at the end of 2013 because of a flurry of imports into the Mediterranean from the US and Middle East, coinciding with a slowdown in demand at year-end.
In the first few months of 2014, however, caustic soda availability in northwest Europe became more balanced. This was because of recent and forthcoming maintenance plans, robust demand in northwest Europe, some optimisation in systems for margin reasons and relatively low chlorine output.
In the Mediterranean, the market remains well supplied, although not as long as at the end of 2013. There is talk of less spot imports coming into the region in the first few months of 2014 because of unattractive price levels.
Other players consider supply in southern Europe to be plentiful from local sellers, regular import cargoes from the US and the Middle East, and new storage/distribution capability by at least one seller.
Chlor-alkali producers are lamenting poor profitability as prices eroded during 2013. The sharpest drops were seen on FOB values in the Mediterranean.
In southern Europe, prices had generally trended down by $190-200/dmt between early 2013-early February 2014, albeit with a few exceptions.
In early February 2014, prices were assessed at $270-290/dmt FOB MED and stabilised during the rest of the month. In early March, prices edged up slightly, but not enough to offset the previous sharp drops. For contract business, prices dropped for the most part during 2013 and into Q1 2014 where values slipped below 400 euros FD NWE.
Nearly all caustic soda is made by the electrolysis of sodium chloride solution using either membrane, mercury or diaphragm cells. The standard ratio of chlorine to caustic soda production is 1 liquid metric tonne of chlorine to 1.1 dry metric tonne of caustic soda.
The lack of profitability in the chlorvinyls industry is illustrated by the recent insolvency of KEM ONE and its takeover, and INEOS ChlorVinyls’ plan to enter into a joint venture (JV) with Solvay.
There is also structural overcapacity in northwest Europe and the legislative need to convert all existing mercury cell technology or shut down production before 11 December 2017. The latter refers to around 26% of existing nameplate chloralkali capacity in Europe, which equates to 3,271,000 tonnes of chlorine nameplate capacity out of 12,550,000 tonnes overall, according to EuroChlor.
However, low ECU (electrochemical) margins in the chlorvinyls value chain means that investment in new cell technology is very challenging. This could result in some production losses. However, there is also the possibility of increasing US caustic soda exports to Europe because of the US competitive cost advantage and the expectation of higher chlorvinyl utilisation in the US.
The likelihood that some European chloralkali capacity will be closed means Europe could be a prime location for US exports.
While European demand is expected to be flat or grow modestly in 2014 with some economic recovery, the landscape of the European chloralkali industry will be subject to more change in the coming years in response to structural, economic and legislative pressures.