Chemical Market Associates, Inc. (CMAI) announces the completion of the 2011 World Chlor-Alkali Analysis, an annual global study that covers historical trends and future projections for supply, demand, production, capacity, trade, pricing and profitability of the global chlorine and caustic soda industry for the period 2005 to 2015.
Included with each analysis is 12 months access to CMAI's online capacity and supply/demand databases with a mid-term supply/demand update, incorporating CMAI's latest market outlook. The analysis is a necessary resource for business managers and planning professionals who need to make strategic business decisions in a rapidly changing global economic and market environment.
Current Market Situation
Over the past three years, the global chlor-alkali industry has experienced one of the most volatile periods in history. The swing from a record growth year in 2007 to the dramatic contraction in 2008 and 2009 demonstrates the risks and challenges the industry has been forced to navigate. Currently, the global industry is again on a growth path and demand is poised to surpass the peak demand period of 2007 by the end of the year. However, the recovery pattern varies by region and there are different drivers affecting the outlook for key markets. While the most challenging period appears to be over for now, certain risks remain. The issue of over capacity will put pressure on industry margins in some regions, while cost-advantaged derivatives will drive expansions elsewhere.
China has leveraged its domestic resources of coal, limestone, and salt to produce chlor-alkali and acetylene-carbide VCM/PVC. The addition of non-ethylene based VCM/PVC production has significantly altered the global chlor-alkali/vinyls markets. Northeast Asia is now the largest producing and consuming region for chlor-alkali. China will continue to add capacity, despite over-build already in the region. Many capacity expansions will continue as they are too far along to stop, with significant capacity slated to start up between 2011 and 2012 in China. Lower operating rates and poor margins will persist, despite relatively high demand growth rates.
North America is experiencing a revived feedstock and energy cost advantage over other regions for many chlorine derivatives, and will add new vinyls and caustic capacity over the next several years. The growth in capacity is despite a slow recovery of the domestic economy.
Caustic soda prices are currently rising globally as tight inventories in the European and U.S. markets support higher regional prices and pull prices upward in other regions. The tight inventories reflect the uneven demand recovery for chlorine and caustic across regions. As trade flows have become more dynamic, caustic prices have become more globalized and supply/demand imbalances in one region affect other regions more quickly than ever before. The CMAI Chlor-Alkali Analysis provides an understanding of what these issues are and explains the relative cost positions of key regional producers in order help stakeholders in the industry stay ahead of the curve.
China will continue to be the driver of global chlor-alkali capacity expansion, adding the most capacity. Regional demand growth, particularly in China, is expected to consume much of this region's production. Nonetheless, caustic export volume from this region is anticipated to increase towards the second half of our five year forecast period. Cost advantaged vinyls derivatives from North America will generate additional caustic soda to satisfy growing demand in South America and the Caribbean for the pulp and alumina industries.
Based on CMAI projections, the global economic recovery will stimulate demand growth for both chlorine derivatives and caustic soda, but in uneven patterns. The developed regions of North America and West Europe will have a slower economic recovery relative to the developing countries such as India, China, Brazil and Russia. Higher demand growth is expected for the stronger economic growth countries. With capacity expansions decelerating towards the second half of the CMAI forecast period, demand growth will begin to absorb much of the existing over-capacity. Nevertheless, CMAI expects that there will need to be some capacity closures, most likely in North America. The relatively low plant utilization rates in some regions suggest that ECU margins may remain challenged at least until the later part of the forecast period.
To find out more about the market issues and CMAI's outlook for this industry, order the 2011 World Chlor-Alkali Analysis now at www.cmaiglobal.com. The analysis is presented in book and CD-ROM format, along with access to CMAI's online capacity and supply/demand databases. Updates to the capacity database are available to clients throughout the year as they occur, and a bi-annual update to the supply/demand database provides a fresh view as the markets develop. Clients benefit from the up-to-date market information which is necessary for strategic business decisions.