BUSINESS
Soda Ash, Caustic Soda Booming, But Chlorine Facing Poor Year Alkalies bolstered by strong domestic and exports demand, whereas chlorine plagued by sagging use and prices, environmental concerns Bruce F. Greek, C&EN Houston
Caustic soda and soda ash are booming. Current demand for these alkalies is holding at high levels in the U.S., and export markets are near peaks reached last year. Strong demand for the two chemicals is forecast to continue through the rest of this year, keeping them in a tight supply position and holding their prices at high levels. But the outlook for chlorine is different. Chlorine demand has declined from year-earlier levels, leaving chlorine to remain in relative oversupply this year. Environmental concerns will further weaken demand for some products containing chlorine. Prices have slumped during the past six months, and a return to higher price levels is not likely for some time. Chlor-alkali capacity currently is operating at its upper limits. In December 1988, for example, on-stream plants in the U.S. operated at 100.2% of nameplate capacity, according to the Chlorine Institute. Small quantities of additional capacity coming on stream this year and next will ease operating rates very little, unless demand for exports, pulp and papermaking, and polyvinyl chloride slip. As long as demand remains strong, the price increases for the alkalies last year and so far this year likely will hold. Increased prices for caustic soda (sodium hydroxide) partially offset the lower prices for chlorine. When
Occidental Chemical's chlorine production facility at Ta ft, La. the two coproducts are considered together as an electrochemical unit of one part chlorine and 1.1 parts caustic soda produced by electrolysis of a sodium chloride brine, income covers costs but still may be below levels that prompt investment in more capacity. Typical list prices for caustic soda are $255 to $355 per ton, depending on grade and location of plant or terminal, according to new prices issued late in February by Occidental Chemical. Average selling prices in the U.S., however, still remain slightly below list. Export prices, which soared last year, are holding above list prices. The situation for soda ash (sodium carbonate) parallels that for caustic soda. Plants are being operated at practical limits of capacities, export demand is strong and could rise (taking any additional output from plants), and selling prices are roughly at list of $93 per ton. U.S. demand for soda ash remains strong despite inroads into glass container markets by metals and plastics. Chlorine lists at about $200 per
ton, but most sales are made at about half that price. Some spot sales of chlorine are lower yet. A firming of chlorine prices, however, is expected because the seasonal increase begins about this time of the year. Production of all these chloralkalies likely will increase slightly
Chlorine-caustic output nearing record 1979 level Millions of tons 3 26 24
22 20 18 L
0 1978 79 80 81 82 83 84 85 86 87 88 89 a : a 100% basis, b C&EN estimate. Source: Chlorine Institute
March 13, 1989 C&EN
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Business
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this year, and probably would in crease more if additional capacity were available, according to Roger E. Shamel, president of Consulting Re sources of Lexington, Mass. Current growth estimates are less than 1% for chlorine, 1.25% for caustic soda, and 2% for soda ash. The reason that growth for caustic soda is high er than forecast normally from the stoichiometry of sodium chloride brine electrolysis stems from expec tations that more caustic soda will be // finished // or concentrated for sale than was done recently, rather than going to use in dilute form for neutralization at the production plant location. Chlorine production in 1989 will reach 11.7 million tons, up slightly from the 11.6 million tons estimat ed for last year. The increase will be the smallest growth for chlorine since 1986 when output just about matched the previous year. The small increase breaks from two years of 5% annual growth in 1987 and 1988. Caustic soda production growth also will be the lowest since 1986, not because of limited demand but rather limited capacity. Output of caustic soda may top 12.4 million tons. How much more additional output would result if more capaci ty were available is uncertain, but sources say that a growth of 5% prob ably could be absorbed by U.S. and export markets. Soda ash production could come close to exceeding 10 million tons 10
a
March 13, 1989 C&EN
for the first time this year. With U.S. producers 7 capacity at slightly less than 10.5 million tons, how ever, a more likely level will be 9.8 million to 9.9 million tons. That would represent about 2% growth from last year. Three years ago, demand for chlo rine was relatively stronger, than that for caustic soda, when expan sions were beginning in such end uses as m a k i n g vinyl chloride, bleaching pulp used in paper and paperboard, and making various chlorinated organic chemicals used as solvents. During 1986, the de mand for chlorine and caustic re versed, and caustic soda consump tion, especially for export markets, surged ahead. More recently, de mand for many of chlorine's deriv atives other than vinyl chloride slowed for reasons such as concern over damage to the ozone layer in the upper atmosphere (from fluorocarbons that have chlorinated hy drocarbons as intermediates) and concern over formation of dioxins during wood pulp bleaching. Meanwhile, strong demand for ethylene derivatives and no signifi cant ethylene capacity additions over the past five years drove ethylene prices well above historical highs. Polyvinyl chloride prices rose in re sponse to ethylene price increases, lifting PVC prices beyond levels that made PVC the material of choice in some end uses. Last year, w h e n these apparent constraints on fu ture growth in demand for chlo
rine became widely recognized, chlorine prices declined. The softer prices are expected to continue at least into the third quarter of this year because inventories of chlo rine and many of its derivatives are believed to be too high in the U.S. and in other nations. And longer term, exports of chlorine derivatives, especially ethylene dichloride and vinyl chloride—an important part of chlorine demand—are expected to decline as new capacity comes on stream in other countries. Behind last year's strong growth in consumption of caustic soda was increased demand for better grades of paper for data processing and for paperboard going into cartons for frozen foods and other consumer products, and increased aluminum production in the U.S. Exports of caustic soda also rose because alu minum production was expanded in Australia and other countries. Im plementation of new environmen tal regulations requiring the neu tralization of waste acids further added to demand for caustic. Increases in caustic soda exports by more than 10% per year from 1986 to 1988—offset partially by in creased imports—tightened supplies drastically. Contributing to the in crease in exports were declines in the value of the U.S. dollar. By the second quarter of 1988, export de mand for caustic soda had become so strong that spot export prices had risen more than 10-fold from just two years earlier and were more than double list prices for sales to U.S. customers. Spot export prices eased by the end of last year, but have remained above U.S. list prices. Soda ash prices also rose during the past year. Despite production at capacity, the specter of a surplus in caustic soda supply hangs over soda ash demand. If demand for caustic soda in uses such as alumina pro duction or wood pulping should weaken and prices decline, caustic soda could replace soda ash. Currently, soda ash has been sub stituted for caustic soda in some uses, as is expected when caustic soda prices rise sharply. The current tight supply of soda ash allows very lit tle new substitution this year, and thus caustic soda consumers will have to live with high prices. D
EC plans to free up trade in energy In a move applauded by the West European chemical industry, the Commission of the European Community is planning to open the market for one of its largest resources, energy, to freer competition. Earlier this month, the EC informed its member states that in July it will propose legal action to require "greater transparency" in energy pricing, especially for contracts of large industrial users of gas and electricity. There also will be several other actions affecting the energy sector, all designed to start breaking up the monopolies in West Europe, as the EC moves toward a single internal market by 1992. As in the U.S., the chemical industry is one of the largest consumers of energy. According to a position paper prepared by the European Council of Chemical Manufacturers' Federations (CEFIC) in 1986, the total energy and feedstock requirements of the West European chemical industry represented 11% of the total requirements in Western Europe of 1.19 millions of metric tons of oil equivalents. About half, 5.7%, of the industry's oil equivalent consumption was used as feedstock, and the remaining 5.3% as fuel. Moreover, CEFIC stated, energy sources—both for fuel and feedstocks—account for an average 10% of the chemical industry's costs and can be, in some basic products, as high as 60 to 80% of the variable costs of production. Thus it is important for the industry to be able to minimize these costs, particularly in the EC, which has only limited resources of cheap energy available. The EC laws will cover several points. Besides fighting secrecy of energy pricing and cost criteria, they will encourage freer movement of energy products, such as electricity, natural gas, and petroleum products; removal of fiscal barriers; and energy efficiency. The "transparency" point is particularly important for the industry because, as EC officials say, lack of open pricing "can hide violations of community competition rules." CEFIC concedes that, in the extreme-
ly competitive industrial environment throughout Europe, companies "have a justifiable need to maintain the confidentiality of their energy supply contracts." However, combined with the opening of supplies—allowing companies to buy gas and electricity from different suppliers — o p e n n e s s of pricing could be an improvement. At present, many energy-generating suppliers in Western Europe have restrictions on their sources. For example, in West Germany, electric power companies are required to burn high-cost local coal, partly paid for by a charge levied on final consumers of electricity. This is an annoyance to French electricity suppliers, whose nuclear-generated power is considerably cheaper. And in the U.K., power stations, which
are currently owned by the U.K. government but are scheduled for privatization in the next year or two, are tied to using British coal, which costs more than imports from Poland, for example. CEFIC already has offered to make available "the best information it has," such as an ongoing quarterly report of average energy prices paid by industrial consumers at various consumption levels in different EC countries, to help open the market to more negotiation and competition. The result, it believes, will be lower prices and hence improved competitiveness. Contrary to some concerns, CEFIC says that security of supply is unlikely to be jeopardized by a more integrated energy market. Patricia Layman
Titanium dioxide supply to continue tight Titanium dioxide will remain in tight supply throughout the 1990s, despite some periods of respite, according to a recent study by Fallon Research Associates (FRA) of New Providence, N.J. The study also predicts that prices will accelerate faster than ever before in the history of the industry as producers justify new plant construction. And there will be more value added by raw materials suppliers. According to FRA, supply of titanium dioxide now is tighter than some suppliers had forecast and is expected to get even worse by the turn of the century. Supply and demand were in balance at the end of 1988 throughout the world. The balance will continue through 1993 in noncommunist countries, but in communist countries there will be a 100,000-metric-ton shortfall by that year. By the year 2000, FRA predicts a 300,000-metric-ton shortage in noncommunist countries and a continuing 100,000-metric-ton shortage in communist countries, resulting in a global 400,000-metric-ton imbalance. FRA says it sees greater growth in demand than most forecasters. These conclusions are based on input from each market around the world. Thus, the study points out,
additions to capacity have been lagging, especially since Du Pont's announced plans to expand titanium dioxide capacity in South Korea, Taiwan, and Brazil by 180,000 metric tons have not been carried out. When the price of titanium dioxide was 72 to 75 cents a lb in the U.S. in 1985, FRA forecast a rise to 88 cents a lb to justify new plant construction in 1988 and 1989. Prices have now reached 96 cents a lb and new plants in 1990 through 1992 will.require $1.00 per lb to earn 20% return on investment net after taxes—the return needed to justify new construction. The price tag for new plants in 1995 through 2000 will approach $2.00 per lb. Since titanium minerals and titanium dioxide are global industries, what happens in one part of the world affects all of the other parts. Noncommunist countries currently are consuming $6 billion worth of titanium dioxide annually. By 1993, demand will rise to $9 billion, and prices will increase 5%. By the year 2000, assuming a price of $2.00 per lb, the value of consumption in noncommunist countries will total $15.8 billion. FRA says that if there is similar pricing in communist countries, global consumption will be nearly $20 billion by 2000. William Storck March 13, 1989 C&EN
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