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A study recently conducted by Consulting Resources Corporation on the outlook for key chlor-alkali chemicals indicates relatively stable market ahead for chlorine, caustic soda, and soda ash. U.S. production of chlorine will grow at a rate averaging about 1.4 percent per year, U.S. production of caustic soda will grow by about 1.5 percent per year, and U.S. production of soda ash will grow by about 1.3 percent per year, reaching a combined total of 42.3 million tons by 2009, and 45 million tons by 2014, from a base level of 39.1 million tons in 2004.

The global chlor-alkali industry has generally been facing maturing demand, a problem made even more challenging by any weakness in the economy. What makes the chlor-alkalis more complex than many other parts of the chemical industry is the unique co-product relationship between chlorine and caustic soda (also known as sodium hydroxide). Chlorine demand is generally more sensitive to fluctuations in the economy than is co-product caustic soda. For this reason there is a perpetual imbalance between supply and demand for these two important chemicals.

Some of the most significant end products for chlorine, such as polyvinyl chloride (PVC) and ethylene dichloride (EDC), tend to see weak demand whenever there is economic weakness. As a result, chlorine prices come under additional pressure from falling PVC and EDC prices, impacting the margins of chlor-alkali producers.

Longer-term, the outlook for the chlor-alkali industry is somewhat predictable. As in the past, the industry will follow the lead of the economy as a whole. As the economy strengthens, chlor-alkali demand and pricing will also change favorably. By 2009, U.S. chlorine production will likely reach 14.3 million tons, up by about eight percent from its 2004 production level of 13.2 million tons. Caustic soda and soda ash will also experience production increases, reaching levels of 15.2 and 12.8 million tons, respectively, in 2009. Average annual growth rates ranging from 1.3 percent for soda ash, to 1.5 percent for caustic soda, will carry U.S. production levels for the three chemicals to levels that are nearly six million tons per year higher than today's levels by 2014.

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U.S. CHLOR-ALKALI PRODUCTION FORECAST
(millions of tons)