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Kuala Lumpur and Selangor are Expected to Remain the Main Markets of the Caustic Acid Industry During the Forecast Period

In this report, Caustic Acid refers to sodium hydroxide, an inorganic compound with the chemical formula NaOH. It is a white solid ionic compound composed of sodium cation Na + and hydroxide anion OH-. Sodium hydroxide is a multi-purpose chemical. As an important part of the chemical industry, it has a wide range of downstream applications, such as the production of pulp and paper, textiles, drinking water, soap and detergents, and metal processing. Caustic Acid has two forms. Liquid Caustic Acid is used in a variety of applications, such as chemical fibers, paper and pulp, chemical products, water supply and sewage treatment systems, and food additives. Solid Caustic Acid is a white and odorless solid, which can be used as chemical reagents, pH regulators, ion exchanger regenerators, catalysts, etching agents or cleaning agents and so on. In 2019, these two types of caustic acid respectively covered a market share of 82.80% and 17.92%.

The main use of sodium hydroxide is in pulp and paper, alumina, soap and detergent, petroleum products and chemical production. Other applications include water treatment, food, textiles, metal processing, mining, academic research, etc. One of the largest consumers of sodium hydroxide is the pulp and paper industry, used in pulping and bleaching processes, waste paper deinking and water treatment. It is used in the oil and gas industry to remove acidic substances from hydrocarbons and exhaust gas. In the textile field, it is used for the chemical processing of cotton and the dyeing of synthetic fibers.

Selangor was the largest revenue market with a market share of 26.91% in 2015 and 26.59% in 2019, an increase of -0.32%. In 2019, the Kuala Lumpur market share was 17.64%, ranking second. The industry concentrate rate is moderate. The top three companies are Malay-Sino, CCM, Tosohwith the revenue market share of 21.51%, 14.38% and 8.86% in 2019.

Compared to the United States and Europe, the epidemic in Malaysia is not very serious. However, the epidemic affected the global industrial chain, especially the transportation of raw materials. The spread of epidemics caused by transportation affected normal cargo transportation. In many countries, there are many cases of transmission in long-distance buses, trains, airplanes and other transportation vehicles. Therefore, there is a risk of virus transmission due to longdistance transportation. Therefore, areas with more severe epidemics have taken certain measures to control transportation. For companies in areas where the epidemic is relatively mild and can start operations normally, even if they start operations at normal times, they will face insufficient supply of raw materials, resulting in lower than normal capacity utilization. From the demand side, the demand in Malaysia is still strong. When prices are affected by the global economic slowdown, the demand side may drop temporarily. However, considering that the epidemic in Malaysia is not serious and economic activities have begun to return to normal, short-term fluctuations are difficult to affect long-term development, and the demand side is not affected much. The risk is that the epidemic still has the possibility of a second outbreak. If the epidemic breaks out for the second time, it will seriously affect the world economy and Malaysia will not be able to survive alone. The ultimate impact on the industry will depend on the development of the epidemic, but some losses have been caused, and the growth rate is expected to slow this year. The value of import and export will decrease.

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Malaysia is one of the fastest-growing economies in Southeast Asia. The manufacturing industry is booming and there is great demand for basic chemical raw materials. According to a Malaysian manufacturer-Chemical Company of Malaysia Berhad (CCM), the demand gap for sodium hydroxide in 2019 is about 140,000/year, and the gap is expected to expand. This is mainly due to the needs of Oleo Chemical, Oil & Gas and other chemical industries. The company publicly stated in June this year that it would increase the production capacity of sodium hydroxide as a respond to the shortage of supply in the Malaysian market.

Kuala Lumpur and Selangor are the largest markets for this industry in Malaysia, accounting for 17.64% and 26.59% in 2019. Kuala Lumpur and its surrounding urban areas are the most industrialized and economical regions in Malaysia. Kuala Lumpur is the financial, insurance, real estate, media and arts center. Kuala Lumpur has been rated as the  alpha city worldwide and the only global city in Malaysia. The city has a large number of foreign companies and is also home to regional offices or support centers for many multinational companies. Selangor is the largest economy in Malaysia. It is the most developed state in Malaysia; it has good infrastructure. Many international companies choose to establish offices and expand markets in these two regions which has brought market growth. With the economic development of Malaysia, Kuala Lumpur and Selangor are expected to remain the main markets of the industry during the forecast period, and it is difficult for other regions to surpass them in a short period of time

Almost all sodium hydroxide is produced by the ionization process of raw salt, and a certain amount of chlorine is produced as a by-product per ton of sodium hydroxide. If the downstream demand areas of sodium hydroxide and chlorine are very different, it will restrict the development of the sodium hydroxide market. This is because liquid chlorine treatment is very dangerous and transportation costs are high, so chlor-alkali production capacity is generally built by the liquid chlorine demand side. The company determines the operating rate of the chlor-alkali production capacity according to the market demand for the downstream products of liquid chlorine. After the liquid chlorine is digested on the spot, the company sells sodium hydroxide. Since liquid chlorine cannot be stored, there is no other conversion method except for the production of supporting products, and it is very toxic and cannot be directly discharged. Therefore, even if the price of sodium hydroxide is high, the company will not increase the operating rate of chlor-alkali. Therefore, when the demand for liquid chlorine is weaker than that of sodium hydroxide, the demand for liquid chlorine actually determines the output of caustic soda. In recent years, the demand for sodium hydroxide in Malaysia is significantly stronger than that of liquid chlorine. The imbalance between the two restricts the production capacity of local manufacturers, thus restricting the development of the industry.