European regulations require all plants to switch to the more energy efficient membrane-cell method of production by 2020.
However, Maureta, business manager for caustic soda at Arkema, said because the European caustic soda markets are mature and the cost of conversion high, only 70% of mercury-based chlor-alkali plants will switch to the new method of production. Chlor-alkali plants produce caustic soda and chlorine as co-products.
"Europe will most probably not convert 100%," Maureta said, speaking at the World Chlor-alkali Conference in Singapore – organised by ICIS and Tecnon OrbiChem.
"It's a ?bn–4bn ($2.86bn–5.71bn) investment [required to convert] in Europe, on markets which are mature. Most probably around 70% will convert," he added.
Maureta went on to say the effect on European production would mean material would be prioritised to the most profitable end-use applications.
He also said European caustic soda exports were likely to remain uncompetitive in regions such as Asia because of high energy costs, freight rates and raw material costs compared with other regions.
"Caustic soda is energy intensive, almost 50% of the [production] cost is energy related," Maureta said.
"We need competitive raw materials. The growing markets are abroad and the distance means there's no good chance for Europe to be efficient in exports," he added.
European chlor-alkali producers say the timing of the costly conversion to membrane-cell technology could not be worse.
Downstream polyvinyl chloride (PVC) margins, which account for the majority of European chlorine use, remain in negative territory following the 2008 economic downturn, when demand for suspension PVC (SPVC) slumped by 25% from record 2007 levels, and soaring feedstock prices squeezed producers.
Little has changed in recent years and the majority of producers agree offtake remains 10–15% below 2007 levels, as the key construction industry, which accounts for more than 70% of SPVC offtake, remains on shaky ground.
According to the latest Eurostat figures, March 2011 construction output fell by 4.9% in the eurozone compared with the previous year. Slovenia, Portugal and Bulgaria registered the largest reductions.
Additional reporting by Stephanie Wilson
($1 = ?.70)
