The global inorganic chemical industry overview

The inorganic chemical industry comprises of several segments, the oldest and largest of which is the chlor-alkali industry. The global chlor-alkali is estimated to be worth $70 billion, while the Indian chlor-alkali industry accounts for 4 per cent of the global market. This segment of the chemical industry produces key compounds like caustic soda, liquid chlorine and soda ash.

Caustic soda is generally used for finishing operations in textiles, for manufacturing soap and detergents, paper, alumina etc. The aluminium industry is the major user of this chemical. China accounts for nearly 34 per cent of global caustic soda capacity and has the highest capacity at 27 million tonnes. The other rapidly emerging centre for caustic soda production is the Middle East. Countries like Australia and Latin America are the leading importers of caustic soda. Majority of the caustic soda is exported from Asia, North America and the Middle East. In India there are nearly 37 manufacturers of caustic soda and have manufacturing units that produce nearly 3.246 million tonnes of caustic soda. These units also produce chlorine. Gujarat is the largest caustic producing state with a capacity of 1.6 million tonnes. The industry’s growth is driven by demand from paper, textiles and alumina industry.

Chlorine is used for a number of applications such as bleaching, water treatment, manufacturing paper and pulp, PVC, fertilizers, pesticides etc. Chlorine capacity in India stands at 2.876 million tonnes. 80 per cent of the demand for chlorine comes from sectors like pulp and paper, vinyl, pesticides etc.

The Indian caustic soda industry has immense growth potential, provided it takes advantage of opportunities in hand. The major raw material used by the industry is salt and India has plenty of this resource. With efficient technology, innovative products and an improved environmental awareness the industry is developing rapidly. Production capacity of both caustic soda and chlorine in India is sufficient to meet domestic demands. 

However, there are several obstacles the industry needs to overcome. China with is higher production capacity and lower power tariff poses a threat to the Indian caustic soda industry. The industry has to sharpen and improve their technical as well as marketing capabilities. Chlorine usage in India is highly limited by a number of factors. It is produced only as a co-product of caustic soda. There is a need to promote usage of chlorine for water treatment that would ensure availability of clean drinking water. Grid power costs in India are higher compared to USA, Europe and the Middle East.

Soda ash is a vital inorganic chemical and is used for manufacturing detergents, soaps, silicate, glass, specialty chemicals etc. Soda ash is produced through the Solvey Process. This chemical can be produced either via the natural or the synthetic method. Natural soda ash accounts for nearly 11.7 million tonnes of the total production. US has the highest natural soda ash capacity. China is also a major producer of this chemical and accounts for nearly 40 per cent of the total global soda ash capacity. The glass industry accounts for 50 per cent of the global soda ash consumption. Soda ash can replace utilization of caustic soda in certain sectors like pulp and paper, water treatment etc.

In India, soda ash capacity stands at 3.16 million tonnes. The Indian soda ash industry accounts for 5.3 per cent of the total global capacity. Gujarat is the major producer of soda ash primarily due to the availability of key raw materials- salt and limestone. India offers two varieties of soda ash- light soda ash and dense soda ash. Increase in urban population and per capita income has led to increased use of soaps and detergents. The demand for soda ash is driven by the glass and detergent industries.

The Indian soda industry includes established companies and world leaders like Tata Chemicals. With adequate capacity the industry can easily meet domestic demands. The industry also exports considerable amounts of the chemical. The consistent growth rate of the end user segments will definitely benefit the soda industry.

China, with increased production capacity and lower power tariff, has proved to be a major threat to the Indian soda industry. With majority of the manufacturing units located in Gujarat the end use industry has to spend high logistics cost as a result of being located in southern or eastern regions.

The chlor-alkali sector provides direct and indirect labour to nearly 1.5 lakh people. The sector is expected to generate jobs for a greater number of people by the end of the XIIth Five Year Plan period. The industry is expected to see exponential growth during the five year plan period. However, in order to reach the growth target the industry will have to collaboratively work with the government. The Indian government should formulate certain policy guidelines on the taxation levels on captive power and electricity. The government should encourage coastal shipping and inland waterways to reduce logistics costs. Petrochemical complexes should be encouraged to produce ethylene, which can double chlorine consumption. The government should support increased chlorine consumption as this would lead to availability of caustic at lower costs.

Renewed R&D efforts, energy efficient technology, enhanced brand building and environmental friendliness will make it easier for the industry to flourish.

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