Low Demand of Caustic Soda may Lead to Decline in its Prices in Europe and North America in September 2022

Steady demand coming from the local or domestic market and adequate accessibility of feedstock tightened the gap between caustic soda demand and supply around the globe from early April 2022 onwards.

It is likely that caustic soda lye prices may go down by USD 50 to USD 70 per tonne during September 2022 in Europe and North America because of the decline in demand from the consuming industries.

The demand from the downstream sectors in the United States market has been balanced and there has been sufficient disposal of raw materials to meet the demand in the local/domestic market. Furthermore, major demand by the end-user sectors in May and June 2022 affected the movement of caustic soda prices in the United States.

Besides, unavoidable calamity in the main Chlor Alkali manufacturing chemical factory like Olin and Westlake within the United States system led to the scarcity of supplies. The elevated rate of inflation in the United States in the background of Russia and Ukraine war categorically caused in the downfall of the caustic soda market in June 2022.

There was a mounting curve of the caustic soda market during end of June 2022 in North America.

Meanwhile, caustic soda market in Europe had witnessed a descending trend while having a considerable dip of 2.5 percent week on week during the end of April 2022 because of the adequate raw material available to meet the prevailing domestic market demand. Moreover, various dealers and merchants allowed continuous discussions to empty their stocks.

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There is a possibility that the demand for caustic soda may surpass the worldwide volume in the second half of this period as predicted by the study of the market trends against present and future volume production suggests. However, the possibility of the shortage may primarily be depended on the seriousness of the worldwide economic recession as projected by the International Monetary Fund.

It has been studied that in 2022 the major concern inside the chlor-alkali industry would relate to the increased caustic soda prices in Europe owing to the elevated prices of electricity and natural gas.

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On the other hand, in the second quarter of 2022 very limited contracts have been settled as the export prices were hiked outside of Europe and so to bring improvement and be more competitive the exporters in European market have brought down the prices. Hence, the persisting soared freight costs and interruptions are some of the hurdles in lucrative export tactics. In the European market the caustic soda flakes price was evaluated at 715/MT in June based on Free-on-Board Hamburg.

In 2020, the demand for caustic soda in the United Stated fell by about 5 percent. This was predominantly because the commodity’s downstream industries were considerably being impacted by the COVID pandemic apart from water processing, detergents, and bleach industry.

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The economy status in the United States started to revitalise in 2021, however the 2.5 percentage of recuperation was lesser than it was projected. This was due to the unexpected situations comprising Deep Freeze during February, which effected the demand of caustic soda as well as the estimations for the caustic soda market. The recuperation of the industry was sluggish and remains the same. The supply of caustic soda continues to be in shortage at present to some extent due to the manufacturing cutbacks in 2021.

Characteristically, a high-level of imports of Western Europe come from the United States however, this came down in the recent times as there were production cuts in the United States, along with the transportation expenses and extended lead period.

To look onwards, because of the slumping demand in some of the chorine by-products the operational expenses are expected to persist in Europe. It is anticipated that the United States may also witness the similar kind of a scenario although at a lower level, reason being the reduction of the output and continual manufacturing concerns. Though the operational cost may be impacted with the forthcoming hurricane season.

There is a possibility that these conditions will keep caustic soda market stable around the upcoming months. During quarter 3 and 4 the market may witness some unstiffening demand or prolonging supply of caustic soda.

As per Procurement Resource, “firm demand from the domestic caustic soda market and satisfactory availability of raw material constricted the gap between the demand and supply of caustic soda in the international market since April 2022.

This trend has been primarily witnessed by the caustic soda market in Europe and the United States. Other factors such as war between Russia and Ukraine, suspected global economic recession, and persisting soared freight costs and interruptions have also led to the declining prices of caustic soda in both Europe and the United States.”