Short Supply May Result in a Sharp Increase in Prices of Caustic Soda in the European Union

The prices for caustic soda in European Union could rise significantly due to shortage. Producers are dealing with a potentially crippling shortage of sodium hydroxide, and continued concerns about the supply and rising costs of C02 gas to the food sector.

As compared to the previous year, the supply of sodium hydroxide could decrease by 50 percent. In addition to the inflationary pressures and concerns over the supply of CO2  gas, this would impose even more costs on supply chains.

Historically, supplies of the chemical used in the food business come from the waste materials produced during the production of other inputs such as plastics, and polymers. However, rising energy prices have increased the cost of creating plastics, and have lowered the demand for the production of chlorine, which has resulted in reduced demand for caustic soda as well, because caustic soda is produced as a part of the chlorine-making process.

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The US chemical company, CF Industries warned recently that they have planned to close its sole surviving UK factory in Teesside. Food producers have already been on edge due to concerns over shortages of CO2 gas, which is widely used in the meat and beverage sectors.

The price of the input has also increased significantly as a result of tighter availability, the poultry company warned last month that CO2 gas expenses had increased to EUR 1 million in a week.

Similar to sodium hydroxide, the majority of the CO2 gas used in the food sector comes from the production of less valuable byproducts. The production of ammonia for fertiliser, has seen its price soar over the past year due to export bans by China and Russia and the recent latter's invasion of Ukraine. This has in turn led CO2 to be a more expensive gas, and a crucial component for fertiliser.

Olin, a US-based manufacturer of Chlor-alkali and epoxy, has lowered its Quarter 3 earnings due to the faster-than-anticipated deterioration of global economic circumstances. As per the market experts, the global economic conditions have worsened faster than expected, with an accelerated deterioration in both European and North American demand, particularly in epoxy and vinyl intermediates.

In Germany, a rise in downstream demand led to an upward trajectory of Caustic Soda prices at the end of Quarter 3 of 2022. Also, European market of Caustic Soda witnessed an upward impetus for Quarter 3 of 2022.

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Due to the War's high rate of inflation, Caustic Soda input costs increased along with the price of energy in the European region. Additionally, a reduction in the Russian natural gas supply and a drop in Rhine River levels during the hot season increased the product's input prices this quarter. Cost pressure on the Caustic Soda market resulted from the Euro's weakening against the US dollar.

As per Procurement Resource, there would be a shortage of caustic soda in Europe, which might cause prices to increase dramatically. In addition to ongoing worries about the supply and rising costs of CO2 gas to the food sector, producers are currently struggling with an unexpected input shortfall that might be crippling sodium hydroxide.  The sodium hydroxide supply could be reduced by 50% from the prior year. This would increase supply chain costs on top of inflationary pressures and supply-related worries over CO2 gas.