Page 178 - CW E-Magazine (3-9-2024)

Special Report

a recovery in Chinese downstream
Production (LHS) Net imports/(exports (LHS) Consumption (RHS) demand remains a key driver of
(ktpa) (ktpa) caustic soda prices.
6,000 6,000
5,000 5,000 Credit profi le supported by balance
4,000 4,000 sheet headroom and diversifi ed ope-
3,000 3,000 rational cash fl ows
2,000 2,000 Most sector players are di-
1,000 1,000 versified with presence across
0 0 chemicals other than caustic soda.
-1,000 Accordingly, such players have
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25P FY26P maintained comfortable credit
profiles, despite the weak per-
Fig. 5 Incremental Supplies Turn India into Net Exporter of Caustic Soda. formance within the caustic soda
Source: Company annual reports & presentation, Ind-Ra division in FY24, due to the other
markets to absorb incremental volumes recommended imposition of anti- operational cash flow streams.
is uncertain amid the current subdued dumping duty on the import of Predominantly, caustic soda players
global demand conditions and the caustic soda from Japan, Iran, Qatar recorded a sharp contraction in the
competition from China, Japan and and Oman. However, in February margins, resulting in a weakening
Iran, in addition to logistical chal- 2022, the Central Government did of the credit metrics over FY24
lenges which could cause exports to not accept the recommendation due although the reduction in leverage
remain range bound. India’s exports to which domestic players still face over the FY22-FY23 upcycle created
to the European and US markets are import risk. some headroom.
minimal since the caustic soda indus-
try here is largely consolidated and Global markets to remain range- Chlorine disposal remains a chal-
the freight and logistic costs are high. bound lenge, power cost a key element
Global capacity utilisations have The global capacity utilisations A critical operational component
averaged at around 80% over the past have remained robust at 80-83% is the level of downstream integra-
decade. with higher downstream integra- tion into chlorine (a by-product
tion to utilise the chlorine produced in the caustic soda manufacturing
Accordingly, around half of as a by-product. China remains process) products such as PVC,
India’s caustic soda exports are to dominant in the caustic soda mar- industrial chemicals and water treat-
Africa whose chemical markets are ket accounting for around 46% of ment chemicals. This is because if
comparatively under-developed the global capacity and 45% of the not used captively, chlorine can-
with the remaining largely spread total consumption with their capa- not be merely disposed of due to
across the Middle East and Southeast city share increasing by 2-3% over its environmental impact. Accor-
Asia. India’s key export destinations the past decade. North American dingly, excess chlorine would
are South Africa (13%), Indonesia players’ capacity share has reduced need to be sold externally and
(12%), Kenya (9%), Tanzania (8%) by 2%-3%. China’s caustic soda often at a negative realisation.
and Nigeria (6%) which accounted production was around 5% higher Domestic chlorine demand is weaker
for half of India’s caustic soda ex- yoy over January-May 2024 and 4% than global demand due to lower
ports in terms of volume over FY24. higher yoy in 2023, despite its weak integration into vinyl chemicals.
domestic downstream demand con-
From an import standpoint, Japan ditions. This indicates that capacity Power cost account for around
and Iran accounted for around 70% of utilisation levels within the country 60% of the manufacturing costs
India’s imports in FY24, with Oman have remained steady. and therefore, players with higher
and Qatar being the other key exporters captive power sources are more cost
into India. Furthermore, with China having efficient in production. Further-
sufficient caustic soda supply, sur- more, players with a higher capa-
The Director General Trade and plus volumes are available with its city share often enjoy better cost
Remedies had in December 2021 producers to export and therefore effi ciencies.

178 Chemical Weekly September 3, 2024

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