Home Impact producer Caustic soda in Asia will remain strict on China’s double-check policy

Caustic soda in Asia will remain strict on China’s double-check policy


SINGAPORE (ICIS) – The current supply conditions for liquid caustic soda in Asia may continue in the near term, as the recent reduction in production in China has had a ripple effect on the entire regional market.

Reduced chlor-alkali production in China prompted some traders to secure last-minute cash shipments the previous week on a fast-load basis to meet their contractual obligations.

Due to China’s double-checking policy as well as a shortage of domestic energy reserves, market players expect production restrictions to remain in place as the country enters the winter season in December.

Since the end of September, some chlor-alkali producers in China have been invited by local authorities to lower their production rates as part of the country’s policy of double checking on energy consumption and intensity.

At least one chlor-alkali producer in China has been licensed to increase production after the week-long Golden Week vacation that ended on October 7, although operating rates were capped at 50-70% of rated capacity.

The global supply of caustic soda has also been reduced by the recent blackouts in the United States resulting from Hurricane Ida.

Other Northeast Asian producers of South Korea and Japan subsequently adopted a short-term bullish outlook, as tight supply was met by strong demand for caustic soda, driven mainly by the downstream alumina sector.

Alumina is refined from raw bauxite ore using caustic soda, and the alumina is then processed into aluminum for end use in the construction and automotive industries.

China is the world’s largest aluminum manufacturer, and the same restrictions on power generation have caused base metal prices to rise globally.

Alumina refiners outside of China, such as Australia and Indonesia, subsequently sought to source more caustic soda from Asian producers in order to maximize alumina production amid favorable net revenues.

“I am taking a bullish stance as buyers on the US West Coast and Australia are willing to buy at higher prices [than southeast Asian
buyers]Said a producer from Northeast Asia.

Caustic soda is used in other sectors such as pulp and paper products, soap, water treatment and textiles, but market participants have observed that regional demand from other downstream sectors such as as pulp and paper and textiles did not recover as quickly in Asia.

During the week ending October 8, CIHI data showed average spot prices for liquid caustic soda increased from $ 75 / dry metric ton (tsm) per week to $ 575 / tms FOB (free on board) in Northeast Asia, while the average price in Southeast Asia jumped $ 105. / dmt week to week at $ 625 / dmt CFR (cost and freight) South East Asia.

Flagship article of Jonathan chou