APLA ’23: Brazil caustic soda anticipates potential new demand through upcoming investments in mining

SAO PAULO (ICIS)–Brazil’s natural resources project can attract investments in mining worth US$ 50.4bn, or more, in 10 years, according to industry plans for the mineral sector between 2023 and 2027, which could rapidly increase the need for caustic soda in the medium term.

Sector executives predict that investments could yield US$ 100bn over five years heading into this year’s annual meeting of the Latin American Petrochemical and Chemical Association (APLA).

Caustic Soda, also referred to as NaOH, is a versatile and influential chemical compound with a wide range of applications in a variety of industries. It is a key component of the mining industry, offering a variety of advantages in terms of extraction, refinement and environmental stewardship.

The cost of caustic soda in Brazil experienced an increase in the final month of October, which was attributed to market input. Players in Brazil had to increase their prices in response to some price volatility in the United States Gulf offers during October.

The competition for the Brazilian caustic soda market is still intense, with both domestic and foreign players operating at relatively close prices, although discount prices are still available depending on the market niche and the quantities negotiated.

US Gulf offers highly influence prices in Brazil, due to a strong competition for market share.

In November, the US Gulf export spot for caustic soda remained largely unchanged from the previous week, with prices ranging from $270 to $380. Contracts for October were negotiated at a steady pace, in line with the previous months, and the export prices of the month varied significantly between grades.

According to the ICIS Supply and Demand database, Latin America imports of caustic soda in Q3 showed some stability in Mexico and Colombia markets, and a decline in Brazil compared to the last three months – seen in the graphic below.

According to the ICIS Supply and Demand data base, Brazil imported a total of 908,720 tonnes of caustic soda in until August of 2023. Comparing with the same period in 2022, Brazil imports decreased 9.60% year on year.

Market participants confirmed that the spot availability for caustic soda from both domestic and international sources continues ample, and inventory levels in Brazil start to gradually reduce in Q4.

In 2023, Brazil’s demand for caustic soda is expected to remain low; however, the mining industry may be able to influence this development. High production costs have hurt the prices of the caustic soda industry and are continuing to reduce margins this year. Brazil’s output of soap, detergents, pulp and paper has decreased somewhat, which has had an impact on market dynamics and raised domestic inventories.

Caustic soda employs an important role in mining and by 2025, the demand for strategic minerals will be 20-25 times higher than that of nickel (nickel), cobalt (cobalt) and graphite (graphene), alone. The IEA projects that the demand for lithium alone will need to grow at a rate of more than 40% over the next five years.

Caustic soda is used to adjust the pH levels at various stages of the mining process. The mineral precipitation can block filters, pipelines and other equipment, so the prevention of mineral precipitation in pipelines and other equipment is done by caustic soda with pH regulation through the process chain.

In 2022, Brazil produced 35m tons of strategic minerals overall. Producing niobium, aluminum, vanadium, graphite, lithium and nickel places the nation among the world’s top users of caustic soda for mineral beneficiation.

A significant component in the production of aluminum is caustic soda. It is employed in the process of refining alumina, which is created when bauxite is extracted from alumina ore. The process of digestion breaks down bauxite in the Bayer process, producing sodium aluminate as the end product. For bauxite to dissolve, both sodium aluminate and sodium aluminate are required, and aluminum precipitates with sodium aluminate.

Large amounts of wastewater are produced by the mining sector, and these effluents may contain a variety of contaminants. To neutralise acidic effluents and lessen their negative environmental effects, caustic soda is frequently used in wastewater treatment. In addition to minimising damage to aquatic ecosystems, this guarantees adherence to environmental regulations.

The cost of selling caustic soda varies periodically, especially in Brazil where low sales all year long are the result of a competitive market share and high stock levels. Caustic soda prices in Brazil remain somewhat unpredictable as long as the country’s economy continues struggling, with investors delaying a lot of projects because of the uncertainty from the political and economic landscape in 2023.

Although the consumption of caustic soda has somewhat declined in certain Brazilian industries, such as pulp and paper, in others, the demand for caustic soda has gone up due to the positive outcomes of sugar and ethanol as well as aluminum used in lightweight cars in Q4.

The ICIS Supply and Demand database shows that South and Central America imported a total of 2.705m tonnes of in 2023, being the North America the main hub of exports to the region with a total of 1.935m tonnes. The US Gulf is the benchmark to the region with basically 71.5% of all imports to South and Central America.

Caustic soda has considerable potential in the mining industry due to its cost-effectiveness for a variety of applications, which can reduce operational costs. It also contributes to environmental sustainability, as it can be used to treat wastewater and suppress dust, thus promoting compliance with environmental regulations and ethical mining practices.

Freight rates were significantly impacted by the COVID-19 pandemic’s long-lasting effects on the chemical industry; however, the current quarter has seen a slight fluctuation in freight rates due to inflation and fuel prices, which the market believes not be able to have a significant influence in new prices hikes until the end of the year.

In Brazil, there are several projects to expand the production of chlorine. One of these is the Unipar project, which is set to double its production capacity from 10,000 to 20,000 tons per year in 2024, with a total investment of R $94m.

The ICIS supply and demand database shows that there is currently 1.330m tonnes of chloride capacity in Brazil.

In conclusion, caustic soda has proven to be an extremely valuable and helpful chemical in the mining industry. Its uses range from ore extraction to environmental management, making it indispensable to the improvement of mineral recovery, mining operations and compliance with environmental regulations. The mining sector will probably continue to play a crucial role in the effective and long-term management of mining operations as it develops.

The 43rd APLA annual meeting takes place 11-14 November in Sao Paulo, Brazil.

Focus article by Daniel Lopes