Caustic Soda Prices in Asia Remains Stable in June, Rising Freight Poses Potential Threat

The price of Caustic Soda in Asia has remained stable towards the termination of June 2024 due to a balanced demand-supply situation in the region. The supply chain in the Caustic Soda market continued to be affected by supply delays and rising selling costs amid low downstream Alumina industry inquiries.

In the last week of June 2024, Caustic Soda prices have remained stable in the Asian market, mirroring the narrow consolidation seen in the downstream alumina market, where production and supply have been steady and spot quantities limited. In the near term, Caustic Soda prices are expected to maintain this stability. The utilization rate of Caustic Soda production capacity is anticipated to be around average in the coming weeks, with a potential increase in near term. Downstream alumina purchases are predominantly demand-driven, indicating a balanced supply-demand scenario. Overall, the Caustic Soda market is expected to experience short-term volatility, heavily dependent on downstream demand trends and inventory management in the Chinese market. The price of flake Caustic Soda has stabilized for the time being since May 2024.

From the Caustic Soda supply perspective, the shipping companies cited the escalating complexity of the situation in the Red Sea and its ripple effects on global supply chains as the reason for the surcharge.  Despite hopes that the situation would improve, market players in Asia continue to face additional challenges and costs, including longer journeys and increased sailing speeds to make up for delays, leading to higher fuel costs. Operational bottlenecks in the Caustic Soda have reduced available capacity, leading to higher charter rates. To cover the additional costs, some surcharges will temporarily increase. The Caustic Soda market players continue to take measures to address the challenges and meet customer needs, with industry-wide trade disruptions expected to persist in the July-September 2024 quarter.

Moreover, the primary drivers behind the sudden surge in the freight charges in seaborne trade are the escalating Houthi rebel attacks on merchant vessels in the Suez Canal, which have disrupted global trade, and the rush by Chinese companies to export goods to the United States before the new tariff takes effect on July 1, 2024. Global shippers are opting for alternate routes through the Mediterranean Sea to avoid the Red Sea, resulting in increased delivery times by two to four weeks and a rise in freight rates by 20-30 percent.

As per ChemAnalyst, the Caustic Soda prices are likely to remain unchanged as the supply issues are expected to continue to affect the selling costs of the product amid low downstream demand in the Asian Alumina industry.