Caustic Soda Market Complexity Prevents Its Forecasting



Caustic soda (molecular formula: HNaO) is an indispensible product for the chlor-alkali segment of the chemical industry. Co-production of chlorine and caustic soda is tightly integrated with the manufacture of multiple petrochemicals (e.g. polyvinyl chloride), which act as their outlet. That is, on par with other important caustic soda end-markets like alumina production, caustic soda is known to be a basic feedstock for a wide range of downstream products, including solvents, plastics, fabrics, adhesives, coatings, herbicides, dyes, inks, pharmaceuticals and more. Such high level of upstream and downstream integration leads to formation of multiple causal relationships and feedback loops which have a capacity to interact with each other via reinforcing (marked by sign “+”) or balancing (marked by sign “-”) mechanisms.

Some positive and negative causal links of the caustic soda (HNaO) market

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For example, within the feedstock/end-market/seasonality interactions, the recent shutdowns of alumina refineries in many countries backed by seasonal price fluctuation may spur the increases in caustic soda inventories, thus leading to caustic soda oversupply and sinking prices. These causal links may well be countered (or reinforced) by other variables, like end-year inventory reductions, tightening of the supply due to caustic soda output constrains (similar to those caused by Shell’s recent cracker problems), scheduled maintenances, to name only a few.

It should be borne in mind that the figure shows just a small example of such interactions, which involve much bigger amount of variables and causal relationships. Things become even more complicated since each system (incl. such intricate systems as the caustic soda market) is dynamic, tightly coupled, non-linear, governed by multiple feedbacks, counterintuitive, adaptive and history-dependent. It often operates within the lack of information, while its causes and effects might be distant in time and space. All this might prevent forecasting of caustic soda market behaviour.

More details on the caustic soda market can be found in the comprehensive research study “Caustic Soda 2015 World Market Outlook and Forecast up to 2019”.