Domestic Potassium Hydroxide Enters Overseas Markets to Mitigate Capacity Surplus

By Zhang Miao, China National Chemical Information Center


Increase of global capacity

The total capacity for potassium hydroxide in the world was around 1.30 million t/a in 2002 and the output was around 1.00 million tons. The global capacity has presented a trend of year-on-year increase since 2002. The capacity growth is especially rapid in China and the United States. There is also a considerable growth in Europe. The capacity in Japan has been maintained stable in recent years.
According to statistics made by China National Chemical Information Center, in 2013, the capacity for potassium hydroxide in the world was 2.584 million t/a, the output was around 1.55 million tons, and the overall operating rate was around 60%. The main reason for the low operating rate was that due to environmental protection issues, some potassium hydroxide production units in developed countries suspended production.
Because of the relatively high production cost and the partial substitutability by sodium hydroxide, there are only 25 potassium hydroxide producers located in 15 countries outside of China. They are distributed in North America, South America, Europe and Asia. OxyChem is the biggest potassium hydroxide producer in the world and its capacity was 318 kt/a in 2013, accounting for 12.31% of the world total, being followed by Tessenderlo (220 kt/a), UNID (220 kt/a), Olin Corp. (153 kt/a) and Evonik (130 kt/a).

Expansion of application scope

Potassium hydroxide is an important bulk chemical product mainly used in the synthesis of potassium carbonate, potassium permanganate, chemical fertilizers and other potassium salts. It is extensively used in medicines, dyes, light industry goods and textiles. With the continuous development of application technologies, the application scope of potassium hydroxide is making a constant expansion.
Worldwide, the consumption of potassium hydroxide in chemical fertilizers accounts for around 10% of the total, and that in the production of other potassium salts accounts for over 50% of the total. With the demand growth of potash soap, its consumption proportion of potassium hydroxide has also made a drastic upgrading and the consumption accounts for around 15% of the total.
In the United States the major consumption sector of potassium hydroxide is the production of potassium salts mainly including potassium phosphate and potassium carbonate and the consumption accounts respectively for 13.8% and 9.5% of the total. Due to the market slackness of liquid detergents and fertilizers as downstream products of potassium carbonate in recent years, the demand for potassium carbonate is basically flat and the production of potassium carbonate has already dropped to the third largest consumption sector of potassium hydroxide. The production of liquid chemical fertilizers has become the major consumption sector and the consumption accounts for 18.4%. The consumption in other potassium salts and potash soap accounts respectively for 8.6% and 14.0%.
In Europe, the major consumption sector of potassium hydroxide is also the production of potassium salts. The consumption in potassium carbonate accounts for 29.8% of the total. The consumption proportion is 16.2% for potassium phosphate and 19.4% for other potassium salts. The actual consumption is lower than that in 2010, mainly because the consumption in potassium carbonate dropped from 120 kt in 2010 to 94 kt in 2013, a reduction of over 20%.
China is a major producer and consumer of potassium hydroxide in the world. The total consumption of potassium hydroxide in China was around 450 kt in 2013, an increase of 7.6% over the previous year. As for the consumption structure in China, the consumption in the chemical industry accounts for 95% of the total, mainly used to produce potassium carbonate, potassium permanganate and other potassium salts. The balance 5% is used in the chemical fertilizer industry. Nearly 30% of potassium hydroxide in China is used in the production of potassium carbonate. Potassium carbonate can be used to produce electrodes to prevent arc break in welding, used as raw material for electron tubes and television kinescopes, used as fire-extinguishing agent when blended with soda ash and as auxiliary material in the production of acetone and alcohol. The aqueous solution of potassium carbonate can be used as antioxidant in the scouring of cotton cloth, the degreasing of wool and the production of rubber. In addition, potassium carbonate is also used in inks, dyes, explosives, electroplating, leather tanning, ceramics, construction materials, crystals, potash soap and medicines. The application of potassium carbonate in the food sector, liquid detergents, water treatment chemicals and chemical fertilizers has maintained a brisk growth in recent years. The average annual growth of the demand for potassium carbonate in China is expected to be close to 5% in the next five years. Figure 1 shows the consumption of potassium hydroxide in China during 2011-2013 and the projection to 2018.

Fluctuation of market price

Let’s take 92% solid potassium hydroxide for instance. Normally, its price is RMB150-200/t higher than the price of 90% solid potassium hydroxide.
The price was around RMB5 800/t at the beginning of 2006. After a stable increase in 2006 and 2007, the price presented a trend of rapid rise in 2008 and once reached around RMB12 300/t in 2009, mainly because of the drastic price rise of raw material potassium chloride and the brisk market demand for potassium hydroxide. With impacts from the economic crisis afterwards, the price of potassium hydroxide started to drop and came all way down in 2010. As the price reduction in the international market was limited and there was a supply shortage of potash resources in China, however, the price of potassium hydroxide once again started to pick up at the end of 2010 and reached RMB8 630/t. The price in China was relatively stable in 2011. In the first 3 months the price was maintained at the high level as seen at the end of 2010 and made a slight reduction later. After a previous price rise caused by the implementation of energy conservation and emission reduction, the price of potassium hydroxide made a rapid downslide in 2012 due to the recession of macroeconomic environment and the price reduction of raw material potassium chloride. The lowest price touched RMB7 100/t. With impacts from energy conservation, emission reduction and high energy price, the production cost of potassium hydroxide hiked and the price trend of downstream products was stable in 2013. A considerable backing was therefore offered to high level. As the price of raw material potassium chloride was unstable, the price of potassium hydroxide had evident ups and downs in the second half of 2013. The price reduction of potassium chloride caused by the sign of large import contracts in 2014 led to a price drop of potassium hydroxide. The market price of potassium hydroxide is basically stable in 2014.

Mitigating overcapacity by export

The foreign trade of potassium hydroxide in China has made evident changes in recent years. Before 2002, the import volume of potassium hydroxide to China was around 20 kt per annum, and there was almost no export. With the completion of the potassium hydroxide unit in UNID (Jiangsu) Chemical Co., Ltd. the import volume started a gradual reduction after 2002: it came down to below 10 kt in 2004 and was only 1 kt in 2013. By contrast, the export volume has made a year-on-year increase by and large. The export volume exceeded 10 kt in 2003. With impacts from the economic crisis, the export volume made a reduction in 2009 as compared to 2008, and it rebounded to 37 kt in 2010. As the demand for potassium hydroxide in Europe, North America, South America and Southeast Asia that are traditional export destinations of China made a downturn in 2011, the export volume from China dropped to 26 kt. With the recovery of the world economy in 2012, the export volume picked up to 28 kt. In 2013, the export volume from China reached 41 kt, an increase of 46.4% year-on-year, owning to the surge of the export volume to South America, Africa and Oceania. The increasing export of potassium hydroxide will help mitigate the overcapacity in China.

Development prospects

As for the consumption structure of potassium hydroxide in China, the consumption in the chemical industry accounts for 95% of the total. The demand for potassium hydroxide is estimated to increase at an average annual rate of 4.4% in the next five years. There will be a considerable supply gap in the domestic market. Moreover, the market demand for high-purity potassium hydroxide will have a constant increase. As rubber auxiliaries and printing/dyeing auxiliaries using low-grade potassium hydroxide as raw material cannot meet market needs anymore, enterprises have to use high-purity potassium hydroxide. The production of fine chemicals such as petroleum additives, high-grade dyes and catalysts and the treatment of high-grade textiles, in particular, will raise more stringent requirements on the quality of potassium hydroxide. There will therefore be a higher demand for high-purity potassium hydroxide produced with the ion membrane process in China.
There is a considerable demand for potassium hydroxide in foreign countries today. The United States, Japan and West Europe are major regions for the production and consumption of potassium hydroxide. The biggest consumption sector of potassium hydroxide in the United States is to produce potassium carbonate. The consumption of potassium hydroxide in Japan and West Europe is also mostly in the production of potassium salts. Potassium hydroxide is also used to produce special fertilizers and the demand trend is robust. In addition, potassium hydroxide is also used in catalysts, medicines, electroplating and photographing, and the estimated average annual growth in these sectors is 2-3%.
The future development of potassium hydroxide will have following trends: (a) The purchase of upstream raw material will be more rational; (b) Small enterprises will be gradually phased out whereas enterprises with technology and scale advantages will make outstanding development; (c) The improvement on the quality of potassium hydroxide in China will surely help domestic producers gain more overseas market share; (d) With the stable development of the downstream demand, the consumption of potassium hydroxide will make a sustained increase.                   ?