Caustic price hike moderates impact of coal on alkali industry

Suresh P. Iyengar Mumbai | Updated on April 04, 2011

The recent rise in caustic soda and soda ash prices has helped manufacturers absorb 50 per cent of the coal price hike implemented by the Coal India in March. Caustic prices have risen to Rs 21,000 a tonne in March against Rs 18,000 a tonne in February.

According to industry sources, price of ‘A' grade coal supplied CIL was increased to Rs 4,100 a tonne in March from Rs 1,610 a tonne, ‘B' grade was up at Rs 3,990 a tonne (Rs 1,520 a tonne), ‘C' grade was at Rs 1,690 a tonne (Rs 1,300 a tonne), ‘D' grade Rs 1,440 a tonne (Rs 1,110 a tonne), ‘E' grade Rs 950 a tonne (Rs 730 a tonne) and ‘F' grade Rs 740 a tonne (Rs 570 a tonne).

CIL has attributed the price increase to rising operational cost and hike in salary implemented in 2010.

Some of the big caustic producers include Gujarat Alkalies and Chemicals, Aditya Birla Group, Tata Chemicals, Reliance Industries, DCW Ltd, Ballarpur Industries, Kanoria Chemicals and Industries and United Phosphorous.

Caustic prices in India are benchmarked to international trend.

Mr Mudit Jain, President, Alkali Manufacturers' Association of India, said firm trend in the international markets has helped manufacturers to pass on 50 per cent of coal price increase, but the future still remain uncertain.

“Most of alkali companies are working at 80 per cent of their capacity due to supply out-stripping demand. The industry has a capacity of three million tonnes a year while the demand is about 2.5 million tonnes,” he said.

Short supply

Globally, caustic soda supply is in short supply after the massive earthquake in Japan. The mishap has shaved of one million tonnes of deliveries even as other companies which were not directly affected by quake reduced their output. Japan has an annual production capacity four million tonnes.

“Caustic price may remain firm at least for next six months due to the disruption in Japan. However, we need to see how much of this will help Indian manufacturers,” said an analyst.

Despite the anti-dumping duty on caustic product imports, the industry finds it difficult to compete with global companies which are most cost competitive.

In the neighbouring countries, the prices of fuel are considerable low and the industry in those countries benefit of cheap power, said Mr Jain.

Published on April 01, 2011

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