Demand for caustic soda in Europe is seeing some weakness in the alumina sector as high energy costs have caused two alumina refineries to cut operating rates.
Last week the Spanish alumina refinery in San Ciprian, operated by American aluminium producer Alcoa, announced plans to reduce the plant's 1.5mn t/yr alumina production capacity by up to 15pc. This came after a 600,000 t/yr Romanian refinery in Tulcea, operated by alumina producer Alum, announced it will cease operations in August until at least the end of the year.
Both producers cited soaring gas prices, and consequently high energy prices, as the reason for reducing alumina output. The outlook for energy prices in Europe remains increasingly uncertain because of a significantly reduced supply of Russian natural gas. There are also concerns amongst market players regarding future energy costs as gas supplies will be stretched further when Europe enters winter.
Argus estimates the loss of caustic soda demand between the two alumina plants to be in the order of 75,000dmt/yr (6,250 dmt/month). This is a relatively small part of European caustic soda demand — less than 1pc — and a portion is typically sourced from outside Europe, but highlights growing concerns about the outlook for alumina and aluminium production in Europe based on elevated energy and raw material prices.
News of the reduction in alumina output at San Ciprian comes after Alcoa announced earlier this year that it is fully curtailing aluminium production at the plant until 2024. Alcoa is not the only European aluminium producer to struggle with rising energy costs, with Norsk Hydro cutting its aluminium production in Slovakia to 60pc in January. But aluminium production is expected to continue in Romania for now as more competitively priced alumina will be imported from China rather than produced on site.
In addition to high operating costs, the aluminium industry is facing a sharp fall in prices as fears about the health of the global economy grow. This could have a further impact on aluminium production, possibly leading to more output reductions in the alumina sector and additional drops in caustic soda consumption.
