Asia's caustic soda producers need to seek for alternative export destinations within the region as traditional market of the west getting limited. There is a sharp decline of Asia's caustic soda spot prices by over 66% during last 6 months to $130-$160/dmt (dry metric ton). The sharp price decline shows depressing market conditions.
"The business window to the US is absolutely closed and producers won't be able to sell there unless they are ready to take big loss." said one producer from Chinese caustic soda market.
There is no strong demand from South America as well, due to pressure from domestic market there. In Brazil import prices CFR Santos hit new lows at $90/dmt.
In Western Europe caustic soda demand has been declined by 23% YTD as compared to last year. Germany, Italy, Spain feeling the heat and average price has been reported between €200 - €300/dmt delivered.
Asian producers have to find alternative market within Asia only, in order to survive, but options are few. China, Japan, South Korea and Taiwan are the biggest caustic soda producers in the world and obviously there is no need for imports. Australia on an average consumes 2m tonnes of caustic soda per year because of their alumina industry, but demand has been significantly declined due to global economic meltdown.
Only India and South-east Asia can be considered as potential export market. India's caustic soda import has been ramped up from 5,000 tonnes a month to 25.000 tonnes a month for past 2 months and at least same amount of cargoes are scheduled to be arrived for next two months.
Spot material had been picked up by Indonesia and Thailand, both of which are having the capacity to be net exporters. Domestic prices in Southeast Asia are hovering around $200-400/dmt delivered. But these export alternatives can not compensate the loss arised due to declining Asia-US trade flow.
Export options in Asia are available to only few players and that also only till the time some preventive measures would be taken by respective governments to protect domestic producer's interest. Anti-dumping duty on various caustic soda producers imposed by India is one live example. The local chlor-alkali association has petitioned for safeguard duties on caustic soda imports. As a result there are already signs of declining buying interest from Indian customers.
There are still some potential markets in Asia like Pakistan, Bangladesh, Turkey. Buyers from these places are still keen to make a deal on caustic soda, but subject to cheaper price.
"We are looking to China and Thailand for our future consignment, but we are expecting much cheaper price" said one buyer from Pakistan. "In Pakistan price that all matter, not quality." he further commented. One more buyer from Bangladesh confirmed, there is major demand of caustic soda in Bangladesh from textile & dying industries and he is looking for some manufacturer from China to provide competitive price. He also mentioned, as caustic soda price in Bangladesh is very volatile at present, so price quote can not be confirmed. It all depends on the market situation. After considering the situation it seems that the buyers from Asia are ready to go for the cheapest deal in the market, so price war is likely not to be over yet.
Africa may be the new export destination, which is a net importer of caustic soda. Many African countries import caustic soda in anhydrous form. But challenges are different there. The region suffers with very poor logistics and many small customers are spread over large geography. But in recent years China succeeded to develop market share here at the cost of traditional European suppliers. The African market is responsible for 40% of China's anhydrous caustic exports for first half of this year.
Some traders are heard to be successful to export caustic soda to China and South Korea which is really unconventional as both of them are net exporters. So, this kind of effort can hardly sustain.
Only a strong recovery in the US economy may help to revive the market condition.