CEH Report

Table of Contents

Abstract

Chlorine and sodium hydroxide, usually produced as coproducts, are two of the most important inorganic chemical commodities. Sodium hydroxide is often referred to as caustic soda or just caustic. The chlor-alkali industry is energy-intensive, with electricity typically accounting for 40–50% of variable production costs. Most chlor-alkali is produced by electrolyzing a solution of brine using either membrane, diaphragm or mercury cell technologies.

As of July 2008, more than 500 companies produced chlor-alkali at over 650 sites worldwide, with a total annual capacity of about 62.8 million metric tons of chlorine. About half of all plants are located in Asia, but many of these are relatively small.

On average in recent years, chlorine consumption has grown at a rate of about 75% of the rate of growth of the world economy. The major use of chlorine is in the manufacture of ethylene dichloride (EDC), which in turn is used to make vinyl chloride (VCM) and subsequently polyvinyl chloride (PVC). Future world growth for both chlorine and PVC is expected to be close to world GDP growth.

The following pie charts show world consumption of chlorine and sodium hydroxide.

The chlorine industry has been under considerable environmental pressure in the last 25–30 years, but most of the negative effects on the chlorine market have already been felt. Use of chlorine to bleach pulp and paper used to account for about 15% of U.S. consumption in the mid-1980s, but this use has largely disappeared in North America and Western Europe because of environmental concerns. Phaseout of halogenated ozone-depleting materials (e.g., chlorofluorocarbons [CFCs], hydrogenated chlorofluorocarbons [HCFCs] and methyl chloroform) is largely complete, although chlorinated compounds are often used as feedstocks for fluoropolymers and other substances, and are not regulated.

Many relatively small sodium hydroxide plants are still operating in Western Europe and Japan; however, there have been shutdowns in the last few years because of stagnating markets and concerns over the impending phaseout of mercury cell production, which still accounts for about 50% of Western European capacity.

Most chlor-alkali uses are mature in the United States, Western Europe and Japan; consumption is expected to grow slowly. Relatively little new capacity is expected in these regions. More attractive growth is expected in the less developed regions of the world. From 2004 to 2008, China increased its capacity by about 50%; consumption of chlorine and caustic soda should grow at a healthy rate between 2007 and 2012.

The chlor-alkali industry tends to be very cyclical, with years of low profitability followed by periods when margins are high enough to justify reinvestment. From mid-2000 until 2003, the industry was in a major slump, with poor profitability, and was further depressed by the rise in natural gas prices in North America in 2001 and 2003. This led to some rationalization of capacity in North America, Europe and Japan. By 2004, the industry was profitable again as prices rose considerably. However, some of the increase in profitability was offset by higher energy costs. As of 2008, the U.S. chlor-alkali industry is experiencing very high prices for caustic soda which has led to excellent profitability. However, demand for chlorine has been depressed because of the slowdown in demand for PVC, which is used mainly in construction. In Europe, with little new capacity being built and the world economy remaining robust, margins were quite good during 2006–2008, as prices were especially high for caustic soda.