Introduction:

The Chlor-Alkali industry plays a pivotal role in the Indian economy by producing key chemicals such as caustic soda, chlorine and soda ash, which are vital elements in several industries. However, there are a few significant challenges, especially concerning the surplus chlorine produced as a by-product during caustic soda manufacturing. As demand for caustic soda grows, there is an imbalance between chlorine and caustic soda production, which is leading to operational inefficiencies and storage concerns. This article delves into the current crisis in the Indian chlor-alkali industry and explores how the crisis shifted towards expanding caustic soda production as a solution to the surplus chlorine problem.

The Chlor-Alkali sector is getting sufficient attention even though not as much as the petrochemical and pharmaceutical sectors. The Chlor-Alkali sector plays a huge role in supporting the growth of chemical and related industries as it produces important products such as caustic soda, chlorine, soda ash and so on. These products are utilized in making a wide range of industrial and consumer goods. Considerably, the industry fulfils the country’s domestic needs thereby making it an example of self-reliance.

Presently, the Chlor-Alkali sector is growing rapidly which is due to rising demand from the industries that use its products.

The three major segments govern the industries linked with these products. The three segments are:
 

Therefore the growth of these end-user industries is interfering with the Chlo-alkali market in India and it is projected to grow over the next five years even amidst some challenging periods.

For instance, the industry is facing a downturn after the first half of FY20, which has worsened in FY21 due to the pandemic and thereby reduced demand from the key industries. The electrochemical unit (ECU) realization – a measure of the average price of caustic soda, chlorine and hydrogen – hit a decade low of about INR 23,000/MT in FY21 compared to INR38,000/MT in FY19 and INR30,000/MT in FY20.

What is the crisis going on in India’s chlor-alkali industry?

The challenge that comes with effectively utilizing the chlorine produced as a by-product during caustic soda production. The issue arises because the demand for caustic soda often outpaces the demand for chlorine which leads to a surplus of chlorine. This imbalance creates operational and economic inefficiencies for the industry.

Production dependency because of the chlorine as a co-product. The manufacturers whether they like it or not, must deal with the excess chlorine they get as a co-product during the production of caustic-soda production in a fixed ratio. Therefore the industry has to deal with this excess chlorine even when the demand is low.

Chlorine is used in sectors like PVC manufacturing, water treatment and pharmaceuticals. These industries have grown rapidly as those using caustic soda, such as textiles, paper and soaps. This discrepancy has led to surplus chlorine.

Furthermore, the storage and handling challenges are critical as chlorine is highly reactive and hazardous making it difficult and expensive to store and transport it safely. This has limited its flexibility in finding alternative uses or markets.

Likewise, surplus chlorine creates disposal challenges due to stringent environmental regulations, which makes the process expensive. Producers are on their way to exploring solutions to these challenges which include exploring vertical integration to include chlorine-utilizing industries. This could balance production and reduce surplus issues.

The major shift to caustic soda:

The chlorine utilization crisis in India has compelled the Chlor-alkali industry to focus more on expanding caustic soda production and their applications for better profitability and stability. The shift is driven by the following factors such as:

Caustic soda demand growth:

Unlike chlorine, caustic soda has a broad and steadily growing demand across industries such as textiles, paper, soaps and detergents, alumina and chemicals.

The manufacturers of caustic soda are also optimizing their production and marketing strategies to cater to the demand.

Some leading players are investing in chlorine derivative units to balance chlorine utilization indirectly.

Grasim industries – Aditya Birla Group:

Grasim has invested heavily in backward and forward integration thereby expanding its capacities in caustic soda while increasing chlorine derivative production such as aluminum chloride, polyaluminum chloride and stable bleaching powder.

Role of AMAI in addressing the common industry challenges and opportunities:

The Alkali Manufacturers Association of India represents a homogenous industry that focuses on the production of caustic soda, Chlorine soda ash and related chemicals. This homogeneity helps AMAI to address the common challenges and opportunities effectively.

The homogenous nature of the industry: The chlor-alkali industry is well-defined and interconnected, thereby producing key products such as caustic soda, chlorine and soda ash. These products share:
 

Key functions of AMAI:

AMAI works with the government to influence the policies that benefit the industry while also including import regulations, energy costs and environmental compliances. AMAI also promotes green technologies such as the adoption of membrane cell technology that is energy-efficient and environmentally friendly as well.

AMAI provides reliable market insights and provides data, trends and forecasts to its members to help them make informed business-related decisions.

On the other hand, they also represent industry interests in discussions on trade agreements, import duties and global competitiveness. Through the detailed industry reports, analysis, the trends related to caustic soda, chlorine demand and ECU realizations, the advises members on strategies that can navigate cyclical downturns such as expanding the caustic soda exports or investing in chlorine derivative plants.

AMAI also encourages R&D investments to discover novel uses for chlorine and derivatives such as hydrochloric acid, chlorinated solvents and disinfectants. Thereby it promotes best practices and innovations which balance chlorine production with growing market demand.

They have also been instrumental in encouraging the transition to membrane cell technology, which is considered the most energy-efficient and reduces overall production costs. The adoption of advanced technologies has aligned Indian manufacturers with global standards helping them to improve their competitiveness while mitigating the chlorine surplus challenge and by focusing on caustic soda efficiency.

Take away:

The Indian Chlor-alkali industry is navigating a crucial turning point as it grapples with the challenge of surplus chlorine production. The demand for caustic soda grows and the manufacturers are focusing on optimizing production strategies and exploring new applications for chlorine to balance the market. Industry players like Grasim Industries and the Alkali Manufacturers Association of India are investing in forward-thinking solutions that include vertical integration and innovative technologies to enhance profitability and sustainability. The transition towards expanding caustic soda production not only addresses the surplus of chlorine but also positions the industry for long-term growth that contributes to the country’s self-reliance in the chemical sector.