^{Issue 55}
London, October 2006

Looming Shortage of Chlorine: HCl-to-Cl Conversion to the Rescue

Insights from a new study “HCl-to-Chlorine: Markets, Technologies and Economics”.

Rarely does one hear about a shortage of chlorine. The chlor-alkali industry usually has enough capacity installed to cope with demand. To be sure transport of chlorine itself is difficult, but regions in deficit can receive supplies in the form of EDC, VCM or PVC.

However the production of one ton of chlorine inevitably results in the production of 1.1 tons of caustic soda (except for a few plants that make potash or magnesium). Chlorine and caustic soda go for the most part into different outlets and it is part of the chor-alkali marketers art to try to balance demand for the two. But economic factors can lead to higher demand for one of the two, in which case the co-product can become a glut on the market. The industry suffers from periodic swings from chlorine-short/caustic-long to chlorine-long/caustic-short. Chlorine prices stay fairly stable throughout -- there’s no point in dropping the price, you won’t sell much more. But this means that chorine-short/caustic-long is bad for the industry since caustic soda prices crater without much support from better chlorine prices.

There are reasons for thinking, see below, that the world is in for a long term (5-7 years or more) trend towards chlorine demand growing faster than caustic soda demand. This threatens low caustic soda prices and poor returns for the chlor-alkali industry. What can be done?

Various solutions have been proposed, but the only viable ones involve more efficient use of chlorine. In some chemical processes chlorine is used but does not all stay in the product, having been employed as a facilitator for the reaction. For example production of TDI requires the use of the chorine derivative phosgene, but none of the chlorine stays in the TDI molecule, it is all rejected as by-product hydrogen chlorine. In the past such hydrogen chloride (HCl) has been neutralised and dumped, but today for the most part the hydrogen chloride is re-used. It can either be converted back to chlorine, via an electrolysis process, and recycled back to the phosgene unit, or it can be fed to an oxy-chlorination unit together with ethylene to make EDC, which reduces the need for virgin chlorine to make direct chlorination EDC. Several isocyanate producers operate such schemes, with Bayer being the leading practitioner of the electrolysis route.

The extent of such recycling today is shown in Figure 1. In 2005 some 2.25 million tons of HCl were taken from isocyanate plants, plus a few other types of HCl by-product generators, and converted to chlorine or EDC, thereby reducing the need for virgin chlorine by 2.2 million tons. Usually the same chlor-alkali company provides the chlorine and takes back the HCl, receiving a fee in exchange. The chlorine is effectively rented to the isocyanate producer.

The double-headed arrows in Figure 1 show what we expect in the way of growth over the next seven years. Chlorine demand, from a base of 49.9m tons in 2005 is expected to grow worldwide by 3.5% per annum, as shown by arrow A, to 63.5m tons in 2012. Allowing for HCl recycle in 2005, virgin chlorine demand was 47.7m tons. Now caustic soda demand is growing at only 3.08% pa by our estimate, and applying that growth rate to virgin chlorine means that virgin chlorine production in 2012 will be only 59.0m tons, as indicated by arrow C. This indicates a shortfall in chlorine production in 2012 of 4.5m tons (63.5 – 59.0). In fact, however, much of this will be covered by HCl recyling, which on present plans and likely new installations should rise to some 3.5m tons by 2012. But that still leaves a shortfall of 1m tons of chlorine by 2012. Hence our title: Looming shortage of Chlorine.

One of the reasons for the stronger growth of chlorine than caustic soda is the powerful world growth being experienced for PVC, at 5.5% pa. This is driven by the construction industry, which is booming in Asia, especially in China. Chlor-alkali production is thought of as being energy intensive, but in fact the production of PVC requires less energy or hydrocarbon equivalent overall than polyethylenes, since over half the weight of the molecule comes from salt. Thus as energy prices rise, PVC becomes advantaged compared to polyethylenes or other plastics. Figure 2 shows that average production costs of PVC go up less steeply than those of polyethylenes as crude oil prices increase. This is reflected also in prices of these plastics. Figure 3 shows that PVC prices used to be quite close to HDPE prices until 2004, but since then HDPE prices have shown a premium of several hundred $/ton. Figure 4 reproduces the gap between the two prices month by month, and plots the gap against the crude oil price for that month. The general trend is for the HDPE price to rise increasingly higher above the PVC price as crude oil prices rise. Since crude oil prices seem likely to remain above $50/bbl for the forseeable future, PVC will continue to have a price advantage over other plastics. On this view, PVC growth will be encouraged and new outlets may be developed in addition to the present uses, prevalently in construction and irrigation.

Returning to the 1m tons of chlorine deficit expected in 2012, measures will surely be taken to correct it. New uses for caustic soda may be encouraged by low prices, particularly replacement of soda ash where this is technically possible -- but potential here is limited. In practice the best potential is offered by modern methods of recyle of HCl to chlorine. This potential is examined in a new study just published by Tecnon OrbiChem, entitled “HCl-to-Chlorine: Markets, Technologies and Economics”. Both the electrolytic and the chemical methods of chlorine regeneration have been improved in recent years. The economics of electrolytic regeneration have been improved by the introduction of oxygen depletion electrodes. Indeed Bayer has just announced that this technology will be used in conjunction with its huge isocyanate plants planned for China. Equally the economics of the Deacon process have been transformed by the introduction of modern transition metal catalysts, principally by Sumitomo. The study compares these processes and makes its judgment on their relative advantages. But it is clear that these recycling methods offer the opportunity for the chlor-alkali industry to increase the level of chlorine regeneration sufficiently to eliminate the looming chlorine shortage.