Outlook
Paper & pulp,
man made fibers, soaps and alumina are the major user sectors of
caustic soda. Together they account for more than 80% of the
domestic demand.
Paper and pulp
sector has been growing at the rate of around 6% pa, in volume
terms. Soap industry is expected to grow at the rate of around
9-10% pa. The demand for caustic soda is growing from this
industry. Caustic soda is used in the conversion of bauxite into
alumina. The demand from this sector is however sluggish. Demand
from man made fiber industry, has slowed down as the sector itself,
is growing at a sluggish pace of 6% pa. Thus overall the demand is
expected to grow at a moderate rate of around 6-7% pa.
There exists excess
capacity in the industry. Capacities are expected to come up even
in FY99 to the tune of 0.16mn tpa. This will further flood the
market with caustic soda. This coupled with increased cost of
production due to increase in power cost and recent salt
shortage(due to cyclone), will affect the performance of existing
players adversely in FY99.
Imposition of
additional customs duty in the recent budget will restrain imports
to some extent. However caustic soda is a byproduct in the
international market. This leads to large scale dumping in
countries like India when the demand for chlorine and subsequently
the prices of chlorine increase in the international
market.
Further, the
lowering of duty for import of membrane cell will not be much of
help for the industry that is already hit by excess capacity and
high input cost. As much as 43 projects, which were awarded letters
of intent in March 31, 1997 have shown little interest in going
ahead due to bleak scenario in the sector.
Thus, only those
producers who have access to cheap power and use latest technology
will be able to survive in the long-term.
