TOKYO -- Asahi Glass will raise prices on caustic soda -- used in papermaking and a variety of other industries -- by 30-40% to more closely match the going Asian rates as domestic demand for the versatile chemical climbs.
The Japanese company began negotiating Monday with volume customers including papermakers and steelmakers to increase prices by 18 yen (16 cents) per kilogram in December from around 60 yen now. Prices on caustic soda exports to Asia were up around 10% on the month as of mid-November and nearly doubled on the year, rising around 50% above the Japanese price.
"Profits on shipments to Asia are climbing -- it would make no sense to let the price gap persist," a representative for Asahi Glass said. The company is Japan's No. 2 producer of the chemical also known as lye, with around 600,000 tons of capacity, holding a 20% share of the domestic market.
Demand at home provides further reason to raise prices. A graying population as well as Asian buyers make for a brisk market for disposable diapers, which include superabsorbent polymers made using caustic soda. The chemical is also used to refine aluminum, used by automakers to build lighter, more fuel-efficient vehicles.
Overall caustic soda demand in Japan increased 4% on the year to 2.53 million tons for the nine months ended September, according to the Japan Soda Industry Association. Production rose just 3%. Many producers "are running close to full capacity and will likely find it difficult to raise operating rates further," a representative for Asahi Glass said.
Whether smaller chemical makers will follow the example of Asahi Glass and other heavyweights is an open question, as persuading customers to accept price hikes will likely prove challenging.