Global Meltdown Affecting Chemicals Price Heavily

Written by: Fibre2Fashion

Global Dyes and Textile Chemical industry is no more insulated from the Global Financial turmoil which was originated in the banking and insurance sector in US and affected its Chemicals Industry initially. In the mid of September, The fourth largest investment bank in US, the Lehman Brothers filled for bankruptcy protection, which caused a dramatic fall in the stock market; round the globe.

Although, before the financial meltdown triggered by the Lehman Brothers announcement, Europeans chemicals industry was preparing for a further down fall in demand and was worried about the expected recession. In its latest trends report, the European Chemical Industry Council (Cefic) has disclosed a turn down in chemicals output since March of this year; however sales have been rising due to an increase in selling prices. The Economy of Germany, so far the biggest chemicals sector in Europe, is predicted by the commission about recession after showing strong growth in the beginning in the year. Industry sources say that the year 2009 could be worse for the Dyes and Chemicals industry as compared with 2008.

India, the second largest producer of Dyes and Textile Chemicals in the world is facing problems due to global melt down. This would be simulating the devaluation of its currency which directly affects its export. However, USA the major consumer of Dyes and Chemicals, have started outsourcing fabrics and other cotton goods where the dyes and chemical are used in large volumes. At the same time, the financial turmoil has spread in such a way that resulted in a decrease in the exports of Korea which could be the biggest challenge for Korea. At the same time, the biggest challenge facing Korea is export slowdown. The petrochemical industry is very sensitive to economic conditions and Korea mostly produces petrochemical products in China and exports to developed economies hence Chinas economic situation will certainly create a serious blow to Korean Petrochemical Companies.

Although Asian governments have taken several actions to control the global credit crisis, dyes and chemicals producers remain uncertain about the possibility of a recession. It is believed that the decreasing price of crude oil is a key factor which is leading to a decline in buying, which is placing additional downward pressure on prices.

Price of Caustic Soda Reaches Historical Heights:

Price of Caustic soda, a key chemical used in the textile industry is affected heavily due to the global melt down and has been increasing since May 2008. World total production of caustic soda is about 45 millions tones and is growing at the rate of 3 % per annum. US is the largest producer of Caustic Soda manufacturing almost 14 million tones per year. A shutdown at major manufacturer 'Dow Chemicals' plant in Texas after the hurricane has added to the price pressure. Caustic soda price has risen to $US 950 - $US 960 / tonne, from about $US 600 - $US 650/ tonne in July which was about $US 490 - $US 500/ tonne in the mid of May 2008. Price of Caustic soda in mid august was about $US 600 - $US 620 / tonne. Industry analysts believe that this is the highest in the past 17 years, and further predict an increase in 2009 reaching more than - $US 1000.

Price Trends of Caustic soda during May-Sep, 2008

Year 2008

Price- $US /Tonne


490 - 500


500 - 560


600 - 650


600 - 650


950 - 960


The near-term outlook for caustic soda is unpredictable due to uncertain manufacturing outlook. It is a rough session for the global dyes and chemical industry today with more and more downgrades coming from the world over. More crackdowns are being predicted by experts in the dyes and chemicals industry. Despite all the recession fears, the industry is trying to be ebullient, and face a downturn. Chemical industry is always cyclical, and manufacturers optimistically expect growth back in the industry.