The caustic soda industry is shifting under the influence of
new market and regulatory influences, most of which mean higher
production costs and slower demand growth for the chemical
– also referred to as sodium hydroxide.
Caustic soda, along with hydrogen, is produced as a
co-product of the chlor-alkali process (electrolysis of sodium
chloride) of making chlorine – a chemical which is
also facing some significant alterations in its market
According to market analysis by consultancy IHS Chemical,
the global trade in caustic soda is currently about 8.5m tpa
and is forecast to rise to 10.3m tpa by 2020.
There are no major global suppliers of chlorine or caustic
soda. The world’s largest producer, Olin
Chlor-Alkali, only has a 6% market share in terms of production
capacity, for example. The chemical is difficult to transport,
meaning that production tends to be regional and output is
generally converted onsite into derivative products. Around 12%
of caustic soda is traded internationally, however, although
chlorine trading is probably less than 1% of production, IHS
The metallurgical alumina industry, in which caustic soda is
used to extract alumina from bauxite to make aluminium, is
among the main drivers of caustic soda demand. IHS figures
indicate that alumina refining accounted for 15% of the 72.7m
global caustic soda demand last year, followed by pulp and
paper, at 12%.
"Sales to alumina refineries represent more than half of the
global caustic soda trade in terms of volume," Vincent
Pedailles-Ledoux, senior analyst at IHS, told
IM. "Most caustic exporters rely heavily on
the alumina industry and, in return, alumina players are
influenced by caustic soda, which represents 13% of their cash
costs, on average."
Curtailments in alumina refinery capacity worldwide,
particularly in North America and China, have weakened demand
for caustic soda, which has put further pressure on prices
already under strain as a result of the collapse in energy
prices, which account for approximately three quarters of
caustic production costs.
Alumina refining is the largest single market for
caustic soda (pictured: a caustic
soda unloader at Alcoa’s Kwinana refinery
Andrew Priest, via Flickr
Australia is the world’s largest importer of
caustic soda, with pretty much all of it going into the alumina
Industry. Last year, the country imported around 2.2m tonnes
caustic soda, which represented 25% of global caustic trade,
according to IHS. Around three quarters of
Australia’s caustic soda consumption was sourced
from Asia, dominated by China, while the
rest was divided between the US and the
North America remains a low-cost region for caustic soda
production and is likely to remain a major supplier of the
chemical into Europe, where a series of consolidations and
company restructurings will lead the continent to become a net
importer of the chemical from 2018.
In China, which has recorded the strongest demand growth for
caustic soda over the last decade, consumption is slowing as
the country’s economy decelerates. IHS
calculations show that Chinese demand for caustic soda was
about 29.6m tonnes in 2015, more than three times that of North
America, which consumed around 11.9m tonnes last
According to Pedailles-Ledoux, Chinese caustic soda
consumption in alumina is set to increase in the near term, as
the country comes to rely more on its domestic bauxite
reserves, which are generally of a lower grade than imported
material. The lower the quality of the bauxite, the more
caustic soda is needed to extract the alumina, he explained,
with an average of 100kg tonnes caustic soda needed to produce
In the longer term, the completion of new bauxite mines in
parts of Africa, South America and Asia-Pacific is likely to
lead China to switch back to external supply of higher grade
material, which will reduce its need for caustic soda.
Global caustic soda demand in
The Middle East, which is seeking to enhance its
mineral/chemicals production and processing capacity as it
attempts to diversify away from the oil market, is a notable
new growth spot on the global caustic soda map.
Saudi Arabia recently invested in the Al
ba’itha bauxite mine and the 1.8m tpa Ras Al Khair
alumina refinery, which commenced production in 2014 and
consumes around 250,000 tonnes of domestically sourced caustic
soda. UAE, meanwhile, is building a 2m tpa alumina facility at
Al Taweelah to process bauxite sourced from Guinea, which IHS
estimates will need 200,000 tpa caustic soda.
India is reliant on caustic imports for its alumina
industry, with around two thirds of its consumption in this
sector fed by overseas shipments, most of which are now coming
from the Middle East. "Indian caustic imports have grown
substantially over the years," said Pedailles-Ledoux. "Sources
of caustic soda have moved from being dominated by Asia
coming mostly from the Middle East. In five years, we estimate
that the Middle East will still be the leading supplier to
India, mainly due to
its better geographical position and product
As for its own caustic soda needs, the region is more or
less self-sufficient. "The Middle East is producing
chlor-alkali quite cheaply, so it is unlikely to import from
outside the region," Pedailles-Ledoux said.
Excess global caustic soda capacity is being absorbed, with
no growth in capacity expected over the next couple of years,
which should rebalance the market. Output volumes will largely
depend on demand for chlorine, however.
"You make more margin on chlorine than you do on caustic
soda and the most important market for chlorine is vinyls,"
"The biggest consumer of vinyls is the construction
industry, in applications like PVC pipes and windows.
Construction is linked to GDP, so that means caustic soda and
chlorine are also both indirectly linked to economic growth.
Consumption in this sector is growing at about 3% per year
– so steadily, but not strongly,"
Top 10 chlorine producing companies
(2016 average annual capacities and market
Pulp and paper
While pulp and paper is currently the second largest
consuming market for caustic soda, at 12% of demand, IHS
expects this market to contract as paper loses ground to
electronic documentation and communications.
"This market could fall to 9% of caustic soda demand by
2020," Pedailles-Ledoux said. "But we expect other markets to
fill this gap. Demand from the alumina industry will continue
to grow, for example."
Legislation: Mercury to membrane
Aside from supply and demand factors, the global caustic
industry is also affected by non-market forces, such as
Tightening environmental legislation across the world,
particularly in Europe, is forcing change in the chlorine
industry and is set to have a significant impact on caustic
IHS estimates suggest that Europe could lose between 1m and
1.2m tpa chlorine capacity by the end of next year, when new EU
legislation banning mercury-based production of chlorine comes
into effect. Impact on actual production will be lower, at
around 300-400,000 tpa, however, as most of the mercury-based
producers closing are operating at low rates, Pedailles-Ledoux
The mercury cell process (also known as the Castner-Kellner
process) of making caustic soda, which uses mercury, sodium and
water to produce caustic soda and hydrogen, was developed in
the 1890s and has been the established method of production for
much of the last century.
Concern about the negative impact of mercury emissions on
the environment predicated the EU’s Industrial
Emissions Directive, which requires all mercury-based
production of caustic soda in Europe to be phased out by 11
According to industry association, Euro Chlor, in 2015 there
were 24 mercury-based chlorine plants in Europe that were
waiting to be phased out or converted to non-mercury membrane
technology – a shift which is estimated to cost more
than €300m ($333m*).
At present, around 58.8%, or 7.3m tonnes, of chlorine
production in the EU, Norway and Switzerland is membrane based
and 24.6%, or 3.05m tonnes, is mercury based, Euro Chlor
figures state, while 16.6%, or 2.06m tonnes, is produced by
In the membrane cell chlor-alkali process, the anode and the
cathode on each chlorine production cell are separated by an
ion-exchange membrane, which only allows sodium ions and some
water to pass through.
The resulting brine is de-chlorinated and re-circulated,
while the caustic solution leaves the cell with about 30%
chlorine concentration, which is usually concentrated to 50% at
a later stage in the process.
Membrane technology does not use mercury, making its
emissions cleaner than those of the mercury cell process and it
also uses less energy than the older technology.
Proponents of the technology point out that the membrane
technology has lower input and running costs than the mercury
process, although the cost of switching over is
Pedailles-Ledoux told IM that the cost of
closing down a facility can be more, however.
"When a producer decides to shut down its mercury facility,
it is not simply dismantling equipment and buildings; it is
also cleaning underground where the soil has been contaminated
by the mercury. It is important to note that, typically, even
though the mercury cells are phased out, other activities
remain on the industrial site. In these instances, the ground
doesn’t need to be cleaned. The cost of cleaning
the ground also depends on the degree of contamination of the
soil, which is linked to the age of the plant, the depth of the
contamination, the type of soil underneath the plant and the
type of technology used."
"Because of these different variables, the cost of a mercury
plant shut down can vary from a few million euros to several
tens of millions," he added.
*Conversion made March 2016