Caustic Soda Prices Are Likely To Remain Low As Aluminium Demand Is Seen As Weak

Aluminium Demand Turns Sluggish, And Fear Of Lower Prices Rises

Aluminium price demand in Europe and leading consumer China slumped recently amidst an economic slowdown worldwide which caused fears for a further decline in prices.

Demand from Europe is especially low, mainly in the construction sector, and the overall scenario has worsened in the past six to eight weeks. Chinese demand outlook is also gloomy as the macroeconomic situation created more uncertainty along with the banking crisis, which affected the financial markets and could lead to more bad news. It is expected that the situation will worsen before it gets better by the end of the year.

Impact on Prices of Feedstock Caustic Soda

The price outlook for caustic soda is persistently declining in the present quarter, which will lead to an additional rise in domestic supply. As a consequence of the declining production in Europe, India turned into a net exporter of the commodity, with exports to the EU (including Spain, Belgium, the Netherlands, and Italy) rising by 241% year over year.

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Despite the gradual improvement in the situation, export volumes dropped in Q4 by 29% QoQ, whilst import volumes increased by 26% QoQ. India remained a net exporter in Q4. However, there was a decline of 64% in volume to just 20,000 MT.

In the first quarter of the present year, caustic soda prices lowered by more than 28% in comparison to Q4-22 because of lower demand from the textile and inorganic chemical industry paired with the ongoing impact of a global slowdown as well as sufficient stock availability in the international market.

According to the Procurement Resource article, demand for aluminium is lagging across the globe, which has caused a slump in the prices of feedstock caustic soda. The decline in demand came mainly from Europe and China as there is a slowdown in the European construction industry, and China is undergoing a financial crunch.

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This decline in demand led to an oversupply of caustic soda in the domestic market, making India a net exporter of the commodity which exports to the EU. Presently, prices for caustic soda are witnessing a decline on the back of lower demand from the textile and inorganic chemical industry, the ongoing impact of a global slowdown as well as sufficient stock availability in the international market.