Soda Industry Analysis Essay

Micro Economics

Group Assignment
On Analysis of Caustic Soda Industry

Submitted By
Nikhil Shankar M (G15092)
Shreyas S (G15111)
Surya Teja Behara (G15114)

Contents

1. INTRODUCTION 3
2. COMPANIES PRODUCING CAUSTIC SODA 3
3. SUPPLY AND DEMAND 4
4. INDUSTRY STRUCTURE 7
5. SIGNIFICANT TRENDS IN THE INDUSTRY 9
6. CHALLENGES FACED BY THE INDUSTRY IN INDIA 9
7. PROFITABILITY 10
8. GROWTH PREDICTION FOR THE FUTURE 10
9. REFERENCES 11

1. INTRODUCTION

The industry we have chosen for this project is Caustic soda (Sodium Hydroxide - chemically known as NaOH) manufacturing industry.
Caustic soda is one of the most widely used and most important inorganic chemicals. Caustic soda has a wide range of applications especially in

The World’s Total production Capacity of Caustic Soda is 80 million MTPA for the year 2012-2013 while India’s capacity is only 3.3 million tonnes which is 4% of the world’s total production.
2. COMPANIES PRODUCING CAUSTIC SODA

There are numerous manufacturers of caustic soda. In spite of numerous players, only a few players sell the product in the market and others manufactures produce it for their internal consumption. The suppliers in India who were selling caustic soda are listed below2.
1. Aditya Birla Chemicals (India) Ltd.
2. Chemfab Alkalis

The caustic soda manufacturing units are mainly located in Gujarat where the raw material is abundant but the end users of caustic soda are not located in close proximity which leads to increase in shipment costs creating a huge disadvantage to domestic players.
The demand for chlorine, which is a co-product of caustic soda industry, is very low in India and so the manufacturers are unable to recover production costs by selling of chlorine.
7. PROFITABILITY

Caustic soda industry is a highly competitive market with not much scope for product differentiation. Hence the profit margins are very low. Since Indian manufacturers have enough capacity for domestic demand, cheap imports have adversely affected the capacity utilization of the Indian manufacturing units hitting their profits badly. Adding to their woe is the persistent high energy and transportation costs.
8. GROWTH PREDICTION FOR THE FUTURE

Demand from alumina, paper and textile drives caustic soda industry. There three industries alone constitute 60% of total demand. Indian alumina industry is growing at the rate of 10-11%, textile at 12% and paper 4-8%. Hence the demand for caustic soda is expected to increase in the