What a difference 2 years can make. That’s the obvious conclusion from comparing US exports of caustic soda today, with those seen in the years to 2012. As the chart, based on Global Trade Information Services data shows:
- Net US exports fell 4% in Q1 (red column) versus 2012 (blue), and were 19% below 2013 levels
- Detailed analysis shows actual exports fell 8% versus 2013, whilst imports jumped 31%
- China’s slowdown meant US exports to Brazil and Australia for aluminium production fell 3% and 47% respectively
- Similarly, the slowdown meant imports from NEA doubled, as producers there looked for new markets
- And imports began to arrive from the Middle East for the first time, as new capacity came online
This is probably just a warning of the larger downturn that is round the corner, as the blog noted last month. Caustic soda has benefited (unintentionally) from the scandal over the role of metals warehouses. These have successfully ‘locked up’ enough aluminium to build 2 years’ worth of cars, and artificially inflated prices.
European producers have similarly benefited from the artificial boost to aluminium production. But European stocks of caustic soda stocks have been rising ominously, with March data from EuroChlor showing them up 9% versus a year ago at 284kt.
Confirmation of the slowdown comes from China itself. Its caustic exports had plateaued at 2Mt between 2011-2013. But her Q1 exports were down 13% versus 2013 levels. And Q1 also saw a 13% slowdown in her exports of the main chlorine derivative, PVC.
Caustic soda, PVC and chlorine are excellent leading indicators for the global economy. They are well established products, having been made industrially for over a century. And they are used in a very wide variety of applications. Whilst US exports are very competitive, due to its low cost position due to shale gas.
Today’s slowdown in US caustic soda exports is thus an orange warning light that the global economy is probably not as robust as we would all like to believe.