Is There a Footing to the Horrendously Rising Global Caustic Soda Price Trend?

The unrelenting supply-demand friction in the global caustic soda market has reached a nerve-wracking height in the third quarter of 2021 owing to the acute shortage of caustic soda in the downstream industries. Caustic soda, chemically known as sodium hydroxide, is an inorganic alkali that is industrially produced in the form of flakes, pellets, and aqueous solution form (lye) of different concentrations. It serves scores of downstream sectors that include soaps and detergents, paper and pulp, alumina, metal processing, mining, and manufacturing of industrial chemicals.

The market sentiments at the start of 2021 represented a positive outlook buoyed by the recovering demand post COVID19 pandemic spread in 2020 during which the market had to scrape through the muted demand, declined productions, and disrupted supply-chain networks on the back of lockdown constraints in most regions of the world. However, the constructive market trends soon turned to ashes as the market fell prey to various obstacles arising in different regions of the world on a trot.

The US market tightened following the Ida hurricane that tore through the gulf coast region in late August, 2021, damaging major production units in its wake. For instance, Shintech had to force shut its caustic soda plant with 1.2 million MT per year capacity located in Plaquemine, Louisiana. Westlake Chemical also had to close its Plaquemine plant of 0.45 million MT per year capacity due to frequent power outages. In addition to the Ida-affected plant closures, several capacity reductions in the US were made to do away with weak market investments. OxyChem discontinued its 0.16 million MT per year caustic soda facility at Niagara Falls, New York, quoting “unfavourable regional market conditions” as the reason for its decision. Olin Corporation went on to a plant closing spree in 2021 starting with the closing of the 0.20 million MT per year and 0.23 million MT per year diaphragm-grade chlor-alkali plants at Mclntosh, Alabama and Freeport, Texas, respectively, in the first quarter, followed by the closing of 20% facility at Plaquemine, Louisiana in the second quarter, and then moved on to announce the closing of the remaining of Alabama facility by 2023. The massive capacity reductions and weak operations in the Ida-recovery phase have crippled the supply-demand balance in the USA.

Get Real Time Prices: https://www.chemanalyst.com/Pricing-data/caustic-soda-3

Europe’s caustic soda market is also in despair with the wrath of the ongoing energy crisis in the region. The resurgence of energy demand with colder-than-normal winters setting foot in the region, depleting domestic inventories, and declined import volumes of natural gas (feed to generate electricity) from Russia and Norway are the major factors contributing to the peaking energy shortage. The natural gas inflation rates have dangerously spiked 600% and is expected to rise even further. The energy shortage in Europe has hit the region’s chemical production units including the caustic soda production facilities which are energy-intensive owing to the use of electrochemical production routes. Hence, the caustic soda market is showing signs of scarcity owing to the planned and unplanned outages in Europe.

China, which has also been hit by the jolts of energy shortage amid the rebounding industrial activities, increased energy needs for winters and the February scheduled Beijing Olympics, is experiencing the spillover of the crisis on its chemical industries which includes caustic soda production as well. China government’s environmental checks conducted in the third quarter of 2021 have worsened matters further as the majority of the Chinese petrochemical facilities had to cut down the operating rates to comply with the government’s directive to reduce energy consumption in view of saving energy and reducing carbon emissions.  The repercussions of the halts in plant operations have caused weak caustic soda supplies and the consequent skyrocketing prices in China.

Meanwhile, the caustic soda market in India took a dramatic turn in the third quarter as it was struck down by the profit-making ideologies of Indian manufacturers. The Indian downstream sectors faced a sudden shortage in caustic soda supplies despite the surplus volumes of caustic soda production in the country, owing to the increased export of caustic soda to the USA which is struggling with low production at its facilities. The increased offtakes by the USA have tightened the caustic soda supply in the Indian market, causing the prices to run on an upward trajectory ever since.

Amidst all the upheaval, the global crunch of shipping containers on ports has led to a surge in freight charges, adding to the costs of imports which are eventually circulated in the end-user market.

As the global caustic soda market draws to doom, a small ray of hope comes in the form of new capacity additions planned to commission by 2025, enhancing the installed global capacity by around 8%. Adani group has planned a USD 4 billion project to build a polyvinyl chloride production plant in Gujarat, India, that will enable the production of 1.3 million MT per year of caustic soda as a by-product. China has planned to commission seven caustic soda plants by 2025, that will together contribute 2.66 million MT per year to global caustic soda capacity. Spain will also see two of its caustic soda production facilities commence operations before 2025, adding 0.22 million MT per year capacity. The USA will also be contributing 1.22 million MT per year to the global caustic soda capacity with two of its planned projects set to start by 2025.

With the moderate capacity additions, the global shortage of caustic soda is expected to ease out at a snail’s speed, which will result in a slow downfall in the spiralling inflation rate. Moreover, these additions cannot be viewed as an immediate solution to the burgeoning cost pressure on the producers which is likely to extend over the next year, ending up pinching people’s pockets. However, a reprieve from the catastrophic energy shortages across the world and recovering plant operations in the USA could turn the tables in favour of the caustic soda market, which the market insiders are desperately hoping to encounter amid the nightmarish market futures.

Read Full Report Here: https://www.chemanalyst.com/industry-report/india-caustic-soda-market-1

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Created on Nov 8th 2021 00:46. Viewed 225 times.

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