USES

Globally, the largest end use of caustic soda is from the alumina industry followed by the manufacture of pulp and paper and the production of organic and inorganic chemicals, the textiles industry, and manufacture of soaps and detergents. In 2017, it is the alumina industry’s demand for caustic soda which has driven the surge in global prices. Major alumina refiners are concentrated in Asia, with countries such as China, Australia, India, Vietnam and the Philippines all having major alumina producers.

SUPPLY/DEMAND

The top five end-use industries of caustic soda are alumina, organic chemicals production, textiles and detergents, pulp and paper and inorganic chemical production. The northeast Asia region is a net exporter to Australia, India, southeast Asia and the US West Coast. Southeast Asia has some local production in Indonesia and Thailand, but overall demand in the region far outweighs its supply, therefore requiring caustic soda users constantly sourcing cargoes from northeast Asia. Australia has become a prominent buyer of caustic soda due to the presence of multiple alumina refineries. It has been sourcing cargoes both from northeast Asia and the US Gulf. China has the largest caustic soda production capacity in the world at more than 45% share compared to any other country or region. Currently it has no expansion plans as it consolidates domestic production with integration and closures of smaller plants which do not meet environmental standards.

PRICES

Prices have gone up dramatically since September 2017 in Asia due to extremely tight supply and booming demand from buyers in the region. Prices in China have largely affected the regional prices. Prices of chlorine, of which caustic soda is the co-product, has been hovering around negative territory for most of the year, which leave chlor-alkali producers in China seeking better returns from caustic soda. Tight environmental inspections in China from September to October led to low operating rates of producers which further limited supplies in the market. Producers in Japan and South Korea both reported extremely tight spot situations throughout much of 2017, which saw most of the international spot demand from China. When domestic prices in China were higher than export prices, Chinese producers were very reluctant to spare any volumes for export, which further spiked export prices. Prices have shown softening signs since the end of November as production cuts of 30% from 15 November to 15 March ordered by the Chinese government on alumina refineries has diminished domestic demand and prices in China, which led producers to soften their export prices too.

TECHNOLOGY

Nearly all caustic soda is generated by the electrolysis of sodium chloride solution using mercury, diaphragm or membrane cells. For every 1 tonne of chlorine, 1.1 tonnes of 100% caustic soda is generated. In Asia, the dominant technology is membrane cells, followed by diaphragm cells and lastly mercury cells. Membrane cells hold many advantages over the other cells, including being the most cost competitive, one of the most environmentally friendly and having the ability to produce highly concentrated caustic soda. Future chlor-alkali projects in Asia will most likely be of the membrane cell process.

OUTLOOK

Growth in caustic soda demand and trade flow in Asia is, and will, still be led by the alumina industry, which is one of the largest
end-users of caustic soda. In Asia, demand from new textile and rayon facilities in southeast Asia and alumina capacities in the Middle East will further increase demand for the cargoes. Supply in Asia is heard to be stable with no major new capacities to be launched in the next year. Therefore tight supply/demand dynamics are likely to continue in Asia, including Australia. Chinese domestic demand is likely to further increase on integrations of smaller alumina producers with larger state-owned enterprises. And the impact of environmental inspections in China will be closely watched as they impact supply/demand balances of caustic soda in the country, which also influences global prices.