Caustic soda output drops 2% in FY13, price nears bottom

Caustic soda production fell 2.1 per cent in the financial year 2012-13 on the back of weak demand from user industries like alumina and textile.

According to the data compiled by rating agency CARE Ratings, caustic soda output in India stood at 2.16 million tonnes (mt) in 2012-13, compared with 2.21 mt in the previous year. Insiders maintained that caustic soda makers cut down production owing to a fall in demand. However, the cut in production did not support prices from falling to one of the lowest in recent months.

Recently, caustic soda flakes prices quoted in the range of Rs 28,000 per tonne, while caustic soda lye prices stood at Rs 25,000 per tonne. Trader sources revealed that four months ago, caustic soda flakes and lye prices quoted at Rs 38,000 per tonne and Rs 35,000 per tonne, respectively. In 2005, caustic soda flakes quoted in the range of Rs 20,000 to Rs 22,000 per tonne.

"The prices have almost bottomed out from its peak levels four months back. In the past one month alone, the price of flakes and lye has fallen sharply by around Rs 5000-10,000 per tonne," said a leading caustic soda trader.

The Care Ratings report noted that the average price of caustic soda lye saw a decline of 7.5 per cent on a month-on-month basis in March to Rs 24.6 per kg. The price of caustic soda flakes also witnessed a drop of 3.9 per cent. On a year-on-year basis, the price of caustic soda lye registered a decline of 12.8 per cent, whereas flakes price saw an increase of 8.6 per cent, Care Ratings noted.

According to industry players, cheap imports from other countries have put additional pressure on domestic prices.

"Increased availability of cheaper imports has caused prices to fall. Also, anti-dumping duty on caustic soda imports is insufficient. The duty is charged on a reference price basis, therefore, the impact of anti-dumping duty is not effective," said a top official of a leading alkali manufacturer.

CARE Ratings also noted that production of soda ash remained flat at the previous year's level of about 2.4 mt in FY13.

"Soda ash consuming industries like detergent, soap and glass have reported double digit growth last fiscal, so the demand is stable from these industries. The production has remained flat and prices, too, have remained stable," stated a soda ash producer.

Added an analyst: "Demand for soda ash would mainly be driven by buoyant consumption from key user industries like glass, soap and detergents. All these factors are likely to keep prices of soda ash firm in the domestic market in the near term."