[Click eStock] Caustic Soda Price Surge... Hanwha Solutions and Lotte Fine Chemical Benefiting

[Asia Economy Reporter Lee Seon-ae] There is a forecast that Hanwha Solutions and Lotte Fine Chemical, which have a large proportion of external sales, will benefit from the surge in caustic soda prices.

According to Kiwoom Securities on the 25th, the price of caustic soda in Northeast Asia (as of the 25th) surged by 40% ($200) from the previous week to about $700 per ton. The price in Southeast Asia also rose more than 40% from the previous week to $752 per ton. This is due to a tighter supply within the region and a stronger market sentiment.

With China's continued energy controls and increased demand for heating energy, the operating rate of caustic soda plants in China is expected to remain low in the fourth quarter of this year. Meanwhile, the new downstream operations in SEA (such as the new alumina plant in Indonesia) are expected to drive additional price increases in November and December this year.

In the United States, at least seven chlor-alkali plants remain shut down, and spot availability appears limited due to rising electricity costs caused by increased natural gas prices. Additionally, China's power shortage has slowed PVC production, which simultaneously reduces the production of caustic soda as a byproduct, further exacerbating the tight supply situation.

Lee Dong-wook, a researcher at Kiwoom Securities, analyzed, "Hanwha Solutions and Lotte Fine Chemical, which have a large proportion of external sales of caustic soda, are expected to benefit. Considering the time lag in price application, the performance improvement of domestic caustic soda companies is expected to be stronger in the fourth quarter."

Hanwha Solutions has a caustic soda production capacity of 840,000 to 870,000 tons, ranking first domestically and seventh in the regional market share. Lotte Fine Chemical, which has a high proportion of external sales, is estimated to have a caustic soda production capacity of 360,000 tons (100% basis).