For the Quarter Ending September 2023
The Caustic Soda prices in the North American region witnessed an upward price trend in the quarter ending September 2023, owing to the consistent offtakes in the downstream Alumina textile industry and increment in the international offers for the product. The Caustic Soda prices in the USA showed an upward trend at the termination of August 2023, governed by supply disruptions due to high freight charges and the low level of the Mississippi River. In the USA, the production run rates were hampered by Hurricane Idalia hitting the Florida Gulf Coast, and Caustic Soda manufacturers in the USA, including Olin, opted to cut output in the face of a slow rise in the demand from the Aluminium industry. Therefore, Caustic Soda market players experienced a shortage of inventories to fulfill the existing offers in the country's domestic market at the end of this quarter. The regional offers from the regional market also gained a positive demand outlook throughout the quarter, and market participants enjoyed sustaining good margins in the USA. The upstream energy price trajectory also rose in the H2 of Q3, elevating input cost pressure.
The Caustic Soda prices fluctuated in the narrow range across the Asian region following consolidation in the market. The Caustic Soda prices in China have recently gained a balanced market situation along with a surge in the downstream Aluminium demand in the first week of September 2023. Meanwhile, the supply side supported the Caustic Soda market, as the adequate stock availability squeezed the demand-supply gap. Meanwhile, the demand for downstream Alumina is improving because of increasing new orders across the regional market, and the operation is expected to remain strong in the later months of the year. The worsening impact of the Typhoon in the country reduced the operational rates and contributed to constraining the domestic supplies for the product at the end of the quarter. Furthermore, the market players increased the prices in the last weeks of September 2023 to sustain their margins amidst a rise in international offers. Additionally, as per the National Bureau of Statistics of China, in August, the Purchasing Manager Index (PMI) of China's manufacturing industry was 49.7%, an increase of 0.4% in August 2023, and the prosperity level of the manufacturing industry continued to improve in the H2 of the quarter for Caustic Soda industry.
During the third quarter of 2023, Caustic Soda prices were relatively stable in Europe, as the regional buying activities were low along with the marginal buying enthusiasm in the downstream textile and Alumina industry. In the middle quarter, the slump in construction activity amidst high-interest rates led to a downturn in the aluminum industry consumption of Caustic Soda throughout the quarter's first half. From the supply perspective, the Caustic Soda price trend is influenced by the lower electricity values in August 2023. The lower input pressure escalated the production activities across the German market, impacting Caustic Soda pricing dynamics. Additionally, the ECB (European Central Bank) raised the interest rates for the last time to lower the impact of the inflationary pressures on the market at the end of the quarter, adding to the factors for the decline in the product's demand since their extended summer vacations and they chose to engage in pre-purchasing activities for the month ahead cautiously. Despite escalated volatility in energy inflation, it is anticipated that the core inflation is coming down and concerns about growth after the latest rate hike by the ECB in August 2023.
Middle East Asia
The Caustic Soda prices in the Middle East Region were low in the quarter ending September 2023, as the demand from the Aluminium industry was on a moderate increase with adequate availability of inventories. This quarter's price decline resulted from the significant pressure from the voluntary oil output cut and stagnancy in the electricity prices. The surplus stock availability and low offtakes in the Aluminium industry across the regional market affected the offshore demand. From the domestic demand perspective, the downstream Aluminium industry inquiries continued to be weak in August 2023 in the Saudi market along with the oversupplied market. Additionally, as per the latest government economic indicators and statistics of August 2023 in Saudi Arabia, due to the high competitive pressure, the Caustic Soda market players opted not to pass the cost burden to the consumers amidst high output prices and weak demand fundamentals throughout the Q3. Furthermore, in the Saudi market, the downstream demand has shown signs of resilience at the termination of September 2023 amidst the country's improving economy.
In the South American region, Caustic Soda prices saw an upward trajectory during the third quarter of 2023 and were primarily driven by consistent demand from downstream industries such as Alumina and textiles and limited supplies from the major exporter China for the product. Specifically, in Brazil, Caustic Soda prices started to rise towards the end of August 2023 due to disruptions in the supply chain caused by the production cut in China and the rise in the import costs in line with the increased demand fundamentals. Consequently, there was a shortage of Caustic Soda inventories to meet the existing demands in the domestic market by the end of the third quarter. Meanwhile, the downstream offers exhibited a positive demand outlook, allowing market participants to maintain healthy profit margins in South America amidst a slow revival in the region's economy. Furthermore, the rising trajectory of energy prices in the latter half of Q3 placed additional pressure on input costs.
For the Quarter Ending June 2023
Prices of Caustic Soda were at an all-time low in the 2nd Quarter of 2023, for which the primary reasons were low demand from downstream industries of alumina, textile, and cleaning industries accompanied by the decline in the export demand due to high-interest rates and rising inflation, which compelled manufactures to cut costs in production and suppliers to destock material due to an oversupplied market. The situation for the overall market was bearish, even though electricity costs were subsidized, which kept production levels at moderate, and the resumption of operations on the West Coast towards the end of May. The weak demand from downstream industries of alumina processing, textile, and cleaning, declination of sales to China, a contracting export market, and the slow economic growth of the US were the cardinal reasons that played a major role in the depreciation of prices. Prices of Caustic Soda depreciated by 9.5% in April due to ample stock supplies, followed by an increment of 5.4% in May and 5.6% in June due to the slow recovery of the US economy and Fed put a pause on a hike of interest rates at the termination of June 2023. Towards the end of the 2nd Quarter, the price for Caustic Soda 50% Liquid was listed at USD 290/MT FOB Louisiana (USA).
In the first month of the 2nd Quarter, prices of Caustic Soda showed an upward trend due to a strong recovery of the economy and strong demand from downstream textile, alumina processing, and cleaning industries, even though production has kept at moderate levels due to a seasonal rise in the consumption of energy. However, in the 2nd week of April, an increment in prices was recorded as chloralkali industries were compelled to reduce production costs due to increasing prices in energy. In the middle of the 2nd Quarter, a decline in the prices of Caustic Soda was recorded primarily due to irregularities in the supply of bauxite and traders experiencing an oversupplied market due to low demand from downstream textile, alumina processing, and cleaning industries, consequently to Labour Day Holidays in China and reduced buying sentiments of the domestic market and a depressed offshore trade. Towards the end of 2nd Quarter, the Caustic Soda industry experienced a balanced market for which the cardinal reason was attributed to the depreciation in the prices of natural gas and elevation of the inventory levels of the product in the Chinese market, along with the consistent inflow of domestic supplies and stability in the downstream demand of Alumina processing and cleaning sector of the industry. Prices of Caustic Soda depreciated to 3.3 % in April, followed by an appreciation of 4.2% in May and again followed by an appreciation of 4% in June. At the end of the 2nd Quarter of 2023, the Caustic Soda Flake price was assessed as USD 345/MT FOB Busan (South Korea) in June 2023.
Prices of Caustic Soda remained stagnant in Europe after a significant drop in the last week of March 2023, particularly because of relatively low demand from the alumina processing sector. The market situation continued to be bearish in the 2nd Quarter of 2023, even though was an abundant supply of stocked material, but logistic strikes and operations halted by workers resulted in the restriction of movement of cargo, in addition to surging inflation and diminishing export orders from overseas. In the middle of 2nd Quarter, prices further declined as demand from downstream alumina slowed, because of which traders experienced an oversupplied market, even though production levels were consistent. Additionally, a slow revival of the European economy led to a decline in domestic orders in the downstream alumina processing market. Prices of Caustic Soda declined by 4.2% in April, followed by 12.4% in May and 5.3% in June. At the end of the 2nd Quarter of 2023, the price was quoted as USD 372/MT Flakes FOB Hamburg (Germany) in June 2023.
Middle East Asia
During the Quarter ending in June 2023, the price trend of Caustic Soda in Saudi Arabia experienced a decline. This was primarily attributed to reduced demand in the Alumina sector, which coincided with the festive season in April 2023 in Saudi Arabia. Despite the improvement in the cleaning industry demand in May, it was not significant enough to drive up Caustic Soda prices due to high supplies in the market. Additionally, buying confidence in Saudi Arabia was hindered towards the end of June 2023, mainly due to sluggish offshore demand and a muted trading atmosphere that followed a week of EID holidays in the local market. The economic slowdown in the region also played a role in dampening purchasing enthusiasm and profit margins for both manufacturers and traders. These combined factors led to the overall decline in Caustic Soda prices during the second Quarter of 2023 in Saudi Arabia. Meanwhile, the availability of materials, an increase in production rates, along with a rise in employment rates prompted market participants to lower their prices in response to reduced input costs throughout the second Quarter of 2023.
During the Second Quarter of 2023, the prices of Caustic Soda reached their lowest levels in the South American market. This decline was primarily driven by reduced demand from downstream industries such as alumina processing, textiles, and cleaning. Additionally, the export demand also dropped due to high-interest rates and increasing inflation, leading manufacturers to cut production costs and suppliers to destock materials due to an oversupplied market. Despite electricity costs being subsidized, production levels remained moderate. The resumption of operations on the West Coast towards the end of May did not significantly improve the overall market sentiment in the importing countries, including Brazil. In April, prices depreciated by 9.5% due to abundant stock supplies. However, in May and June, there was a slight recovery with increments of 5.4% and 5.6%, respectively, mainly due to the slow economic recovery in the US and the Federal Reserve deciding to pause the hike of interest rates by the end of June 2023 impacting Brazilian Caustic Soda price trend.
The Caustic Soda prices were on the downward side in the Quarter ending March 2023, owing to the slumped new offers from the downstream agrochemical and cleaning sectors and the high level of inventories. The business activity remained at a slow pace towards the end of Q1 of 2023, driven by the slowed-down operational activities in the downstream sectors amidst higher interest rates and modest economic growth. The widening of the demand-supply gap has impacted the pricing dynamics of Caustic Soda significantly in this Quarter. As per the latest insights, at the termination of March, prices were affected by the delays in the cargo movement in the international market and rising volume at the US ports in March 2023. Thus, the price of Caustic Soda showed a quarterly decline of nearly 3% in the Q1 of 2023.
The modest rate of increase in new orders in the Chinese market during the Quarter ending March 2023 caused mixed sentiments in the Caustic Soda market. Caustic soda prices showed an overall stable trajectory as a result of reduced inflationary pressure after the fading impact of COVID market-related disruptions and progressively rising consumer confidence in China's domestic textile industry and other competitive industries. This Quarter, The final Caustic Soda prices in South Korea have been influenced by the tumbling export demand amidst high stock volumes and current market turbulence in the Quarter ending March 2023. Meanwhile, the persistent economic slowdown in South Korea also contributed to the Caustic Soda price momentum in the first Quarter of 2023. Thus, the price of Caustic Soda showed a quarterly decline of nearly 4% in the Q1 of 2023 in the Asian market.
The Caustic Soda prices in the European market faced market-related uncertainties and tightening consumer budgets due to inflation in the first Quarter of 2023. Therefore, market players remained cautious about downstream inquiries recovery. The Caustic Soda price showed a major decline of nearly 4% in the quarter ending March 2023. Meanwhile, the Caustic Soda price dynamics in Europe experienced modest growth, driven by a slow increase in the offers from the downstream alumina and cleaning sector. However, the confidence level in transactional activity was minimal in March 2023 as overseas purchase orders were postponed. The European economy has persistently slowed down this Quarter, leading to dented consumer and business confidence in the Caustic Soda market.