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Europe to remain net importer of caustic soda on capacity crunch

Feb 19, 2016

    Europe is likely to remain a net importer of caustic soda as capacity is threatened by the EU's 2017 deadline to make the costly switch to greener technology, Michael Trager, CEO of German PVC producer Vestolit, said this week. "In the mid-term, we expect some chlor-alkali capacity [which are not in line with the EU's Best Available Techniques (BAT) conclusions] in Europe to close, thus turning our region into a net importer," said Trager. The EU 28 became a net importer for the first time in 2013 when imports of liquid caustic soda surged by 49% on the year to 803,368 mt due to cheaper supply overseas, while exports rose 3% to 631,989 mt, Eurostat data showed.

    Previously, Northwest Europe supplied the net-short Mediterranean region, but this arbitrage route is shifting in favor of overseas suppliers. The Mediterranean has increasingly been importing caustic soda from the Middle East due to its cheap feedstock and advantageous geographical position. It also imports occasionally from the US, inverting a traditional arbitrage route, such as in late 2013 when US prices dived to a 38-month low and fell into discounts to European prices due to weak demand and a force majeure downstream at Norsk Hydro's Alunorte alumina refinery in Brazil, the largest in the world. The latest Eurostat data shows that Europe's imports are still exceeding its exports going into 2014. The EU 28 imported a total of 130,050 mt in January and February while exporting 113,357 mt over the same period. Going forward, Europe is expected to rely increasingly on overseas supply as the EU turns up the heat to switch from the mercury process, which releases toxic emissions, to membrane technology. In December, the European Union concluded that mercury cell technology can no longer be used in chlor-alkali units beyond December 11, 2017.

    Overall, around 26% of European chlorine production capacity is still based on the mercury process, according to Eurochlor in January 2013. In Europe, total caustic soda production capacity was around 13.8 million mt in January 2013, according to Eurochlor. But since then, Ineos ChlorVinyls has closed its 149,000 mt/year mercury chlorine cellroom at Wilhelmshaven, Germany in July 2013. A second trade source also said he expected further production shutdowns by 2017. "We believe some manufacturers will not convert to membrane, causing production shutdowns at the end of 2017," the source said. Small scale, non-integrated mercury-based caustic soda plants are the ones most likely to close, said Platts petrochemicals analyst Hetain Mistry. "It will be too expensive for them to convert to membrane technology, so the likelihood is that Europe's import dependence is expected to increase into the medium to longer term," he said.