China’s Caustic Soda Exports - Shifting Trade Winds in Asia-Pacific and Beyond

China has long played a stabilising role in the Asia-Pacific caustic soda market, typically exporting 5–6pc of its production to other regions. These exports help balance domestic supply and demand, with Indonesia, Australia and other regional participants key destinations. Caustic soda is a critical input for industries such as alumina refining, battery materials processing, and pulp and paper manufacturing in these countries.

Recent developments in global trade dynamics are reshaping the flow of caustic soda. Despite the US imposing new tariffs on Chinese products, the impact on caustic soda exports has been minimal. China had already scaled back its shipments to the US west coast in 2019, following the imposition of earlier import duties. Since then, exports to the US have remained at minimal levels.

China's export availability will probably tighten further. This is largely because of rising domestic demand, driven by expansions in its alumina refining and battery material sectors. While existing trade relationships with countries like Indonesia and Australia are likely to continue, the room for additional exports may start to shrink.

This creates an opportunity for emerging exporters. India, for instance, is well placed to step in and meet the growing demand in southeast Asia and Australia, potentially changing regional supply chains.

The US continues to import around 500,000 dry metric tonnes (dmt) of caustic soda annually — about 350,000 dmt to the west coast and 150,000 dmt to the east coast — from northeast Asia (NEA), as well as others. Although China ceased exports to the US in 2020, other NEA countries like Taiwan, South Korea and Japan remain active suppliers. A 10pc import duty now applies to these countries as well. China’s import duty to the US is currently 34pc and has been as high as 145pc amid the recent trade dispute.

Will NEA cargoes continue to flow to the US west coast, then?

Sourcing from the US Gulf coast (USGC) is the alternative, but this presents logistical and cost challenges. Shipping from the USGC to the west coast involves navigating the Panama Canal and the Mississippi River, and only US-registered vessels can be used for domestic shipments because of the Jones Act of 1920, which drives up freight costs.

Imports from NEA (excluding China) are expected to continue to play a vital role in meeting regional demand, given these constraints and the lack of significant production capacity on the US west coast.

Data and analysis from Argus Chlor-Alkali Outlook and Argus Chlor-Alkali Analytics was used to create this blog.

Author: Anshu Pandey