Feb 15: An uptrend in the domestic prices of caustic soda is in the offing. The prices have increased to Rs 8.50-9 per kg from Rs 7.50-8 per kg a month back. This marks a recovery from the all-time low of Rs 7 per kg last month.Industry sources said that the prices are expected to increase further and in another two months they should be stabilising around Rs 10 per kg. A year ago, caustic soda had touched a high of Rs 13-14 per kg.
The slump in the prices of caustic soda had led to massive production cuts -- a problem complicated by the simultaneous addition of fresh capacity from new plants. To top it all, imports to the extent of 50,000 tonnes had taken place in 1997, which distorted the demand-supply scenario even further.
The international prices of caustic soda, industry sources add, are now ruling above the domestic price at $200 per tonne (c.i.f. India). The landed cost, after a 25 per cent duty and storage charges, comes close to Rs 10,000 a tonne. The reduction in import duty to 25 per centfrom 30 per cent in the last budget was the main reason for increased imports.
With imported stocks now drying up, the domestic industry has got some breathing space, especially since import prices are now higher than domestic prices. With the international prices unlikely to come down, there seems to be no near-term price threat to domestic manufacturers, said one businessmen with interests in caustic soda. Manufacturers will, however, continue to curtail production (operating at around 60 per cent capacity levels) in order to help the industry to revive faster. Sacrificing on capacities would help the industry bounce back to normalcy within a year, said sources.
Sources said that the industry is expecting the rupee to depreciate against the dollar and touch Rs 45 by April this year. This, they said, would help exports of caustic soda which, in return, would help companies attain better capacity utilisation.
Currently, caustic soda manufacturers like Gujarat Alkalies and DCW, among others, areexporting caustic flakes. Exports of caustic flakes are to the tune of 10,000 tonnes per month. This, the industry fells, could increase to as much as 30,000-40,000 tonnes per month if the rupee depreciates further against the dollar.
During 1997, several new capacities were created, which included Chemfab Alkalies at Pondicherry (79,200 tpa capacity) and Indian Petrochemicals Corporation Ltd (IPCL) at Jageshwar in Gujarat (100,000 tpa).
The operating margins of all the producers are likely to be affected as input costs have gone up. The worst affected will be the newer plants, which had set up capacities in anticipation of higher prices in future.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
