Summary
There are around 45
players in the domestic caustic soda industry. However, only 10 of
them account for 67% of the total domestic production. The total
domestic capacity in FY98 stood at 2.19mn tpa. Against this the
production was 1.42mn ton, indicating 65% capacity utilization. In
value terms the industry size is around Rs17bn. The capacities in
the domestic sector have outstripped demand growth. The situation
worsened further due to cheaper imports in the last few years. This
forced many producers of caustic soda to operate at low capacities
in FY98, therefore affecting profitability.
The units are mainly
located on the west coast due to two reasons, namely abundant
availability of salt, one of the key inputs required for the
production of caustic soda and proximity to user industries. Power
and salt form the key inputs in the manufacturing of caustic soda.
Power is a major cost item as it accounts for almost 65% of the
total cost of production.
Paper & pulp,
manmade fibers, and soaps form the major user industries of caustic
soda in the domestic market. Demand growth for caustic soda depends
on growth in the user sectors. Demand is further affected by the
substitution of caustic soda with other alkalis.
Chlorine is
generated as a co-product in the production of caustic soda. In
India, caustic soda is more in demand than chlorine. However, in
global markets it is the demand for chlorine, which drives the
demand-supply of caustic soda.
Huge capacities of
caustic soda have been built both in the domestic as well as
international market thus increasing the supply of caustic soda in
the global market. This coupled with high cost of inputs in India
will continue to affect the performance of domestic players
adversely.
