A major consequence of the financial downturn has been the
reconfiguration of the manufacturing footprint of core
Chemicals Ltds soda ash facility in Mithapur,
India. The group is the worlds second largest
soda ash producer
Tata Chemicals Ltd
The resultant rationalisation - as
markets such as automobiles, construction, and glass relocated
part or all of their manufacturing centres to emerging markets
- uprooted traditional supply chains.
The subsequent recovery in
industrial output has been highest in these rapidly developing
regions, where modernisation and wealthy middle classes are
ensuring demand for anything from new housing to high-tech
Soda ash has been no stranger to
this reconfigured commodity landscape. Its end markets,
comprising staples such as glass, detergents and chemicals,
have been part of the rapid recovery in consumerism.
As a result, the alkali chemical -
which can be produced from naturally occurring sources or
synthetically via several chemical processes (see
panel) - is exiting the deep market trough of 2009-2010
and is, on the face of it, emerging relatively unscathed.
Demand in 2011 has been
extremely encouraging in almost all markets with many key
markets displaying robust demand growth, Zarir Langrana,
head of strategy and global marketing at Tata Chemicals Ltd,
Producers in North America,
India, Kenya, Turkey and parts of the European Union are
running flat out and China too is running at optimal rates.
Most markets remain snug in terms of supply/demand dynamics
with some markets showing distinct signs of tightness, he
Indian-headquartered Tata Chemicals
is well-placed to comment on global trends, operating soda ash
facilities in India, Kenya, the UK, and the USA, with a
combined capacity of 5.3m. tpa - making it the worlds
second largest producer, after Solvay.
A key challenge for producers
is dealing with and managing high raw material and energy input
costs that seem to be impacting all producers in all
regions, Langrana explained.
The group has seen soda ash
consumption grow in all markets, with developing regions -
China, India, Latin America, and South East Asia - showing
extremely robust and healthy growth rates,
according to Langrana.
China is the worlds largest soda ash producer, with an
output of 19.35m. tonnes in 2009 - meaning it dominates global
capacity, accounting for almost half of all soda ash
production. Its closest competitor is the USA with 10m. tonnes
produced in 2009, after which fall smaller capacity countries
such as Russia (2.3m. tonnes), Turkey (1.5m. tonnes), and India
|Figure 1: Eti Soda exports, 2010
Global production estimates for
2010 vary according to producer but all are in agreement that
consumption is recovering.
Bill Breunig, marketing and sales
director of US trona producer FMC Wyoming Inc., believes that
global demand in 2011 will be between 50-51m. tonnes:
That would represent a growth of 4-5% or a couple of
million metric tonnes over 2010 levels.
The highest former level was
in 2008, then demand dipped in 2009 with the global economic
situation. Demand began to come back in 2010 and in 2011 we
think demand will be above the 2008 levels - which was 48.5m.
metric tonnes, Breunig told IM.
A US trader forecast that global
demand in 2011 could rise by 5% on 2010 levels, which
itself increased by 9% over 2009 figures, the source
Demand across all end-use
sectors is strong, being led by glass for construction and
automotive in emerging markets, and likely to be sustained
through 2015, the trader told IM.
Consumption is growing
robustly in all developing and emerging markets, and in fact
stronger than expected in Japan and South Korea as well. Europe
and North America are running higher than last year despite all
the negative press about debt and default, he added.
Turkish newcomer Eti Soda AS has
also reported strong demand in 2011 compared to the previous
year, noting that supply has tightened mainly due to
Chinese production bottlenecks.
China, India, Russia, South
America and developing countries are growing, Sinan
Solaklar, Eti Sodas sales and marketing director, told
IM. Europe and the USA are at the same
level as last year.
Interestingly, views of the
European market range from stagnant to
recovering, with domestic producers most optimistic
about the regions health.
During the groups analyst
conference call in late June, Vincent Decuyper, group general
manager of Solvays chemicals sector, said that the
producer saw a clear difference between Europe and
the USA: On the domestic market we see clearly a recovery
of the demand in Europe, and its more pronounced in the
northern part than in the southern part, but globally in Europe
there is a clear improvement of the demand.
While in USA clearly the
domestic market and its link to the construction activities
still remains [very mute] and with no significant improvement
of the soda ash demand, Decuyper said.
The group believes that both
European and US markets have been sustained by export demand
from Latin America and Asia - something it is experiencing
Solvay is the worlds largest soda ash producer, with a
7m. tpa output that is sourced from plants in Bulgaria (joint
venture with Sisecam), China (j-v with Tianjin Soda Ash Plant),
Egypt, France, Germany, Italy, Portugal, Spain and the USA. In
the USA it operates a trona facility from the Green River basin
in Wyoming and holds a mothballed soda ash solution mining site
in Colorado, where production was stopped in 2004.
Although the USA has slipped behind
China to become the worlds second largest soda ash
producer, it remains the single largest source of natural soda
ash - largely produced from the Green River basin.
Around 47bn tonnes of recoverable
trona ore are located in beds over an area of 1,000 square
miles in the region - enough to supply the worlds soda
ash needs for several hundred years - formed from the
evaporation of an ancient water body, Lake Gosiute.
The region is mined by four
companies; in addition to Solvay Chemicals USA, other producers
include FMC Wyoming Inc., OCI Chemicals Corp., and Tata
Chemicals (Soda Ash) Partners. Collectively, the latter three
comprise the members that form export arm American Natural Soda
Ash Corp. (ANSAC), established in 1984.
The USAs other major soda ash
producer is Searles Valley Minerals in California, owned by
Nirma Ltd of India, a solution miner that produces soda ash,
sodium sulphate, and boron minerals with a total capacity of
about 2m. tpa. Combined, the USAs soda ash producers have
a nameplate capacity of 14.5m. tonnes, according to the
Although China is the worlds
largest producer, the USA tops the soda ash export market -
shipping about 5.4m. tonnes in 2008 (45% of production),
according to Harriman Chemsult. This reliance on exports has
proven to be a source of vulnerability in the past, but as
Solvay inferred to investors, it has buoyed US producers over
the last 18 months.
After [the USA] went through
the 2009 downturn, exports for the first time exceeded domestic
consumption in 2010, said FMCs Bill Breunig.
We exported 51% of production in 2010.
US producers reported significant
falls in demand in 2009 as the financial crisis took hold and
the expanding commodity bubble finally burst. The domestic
market dropped by around 15% that year, only recovering 5% in
2010 with slow growth reported in 2011 - perhaps a
1-2% increase, Breunig forecast.
Despite a muted domestic market, US
soda ash companies have enjoyed strong demand and bullish
prices - and the country is running at its full effective
capacity - largely because of its export position.
In evidence of this, FMC restarted
production at its idled Granger facility in July 2011. The
plant is running at an initial capacity of 500,000 tpa but FMC
announced that work has started to ramp up the facilitys
output to 1.2m. tpa over the next few years.
Were doing this because
we can compete with China and China actually has had to back
off, Breunig explained. The Chinese are probably
operating at 80% of capacity right now.
If you go back 10 years ago,
this situation would have been the reverse - the Chinese
operated nearly all manufacturing at full capacity, and would
ship at or below variable cost, Breunig commented.
The Chinese are willing to sit on capacity rather than
ship at a loss today, but their cost position was better a few
Breunigs projections for 2011
indicate that the USA will increase its exports -
probably to around 52% - because of the
sluggishness in US consumption paired with the competitiveness
of US-sourced soda ash overseas.
Market participants report that FMC
is not the only US soda ash producer planning to increase
capacity, with a local supplier telling IM:
Other ANSAC members are evaluating projects as well for
2014/15 start-up - though formal announcements of the same are
Although Solvay exited ANSAC this
year, it still supplies the export body - and its mothballed
operations in Colorado could be a contender for new supply.
Aside from Solvay, the obvious candidates for additional
capacity are Tata and OCI.
The European soda ash market has also witnessed the emergence
of a strong exporter, in the form of Turkish newcomer Eti Soda
AS - a joint venture between state-owned Eti Mining (26%
ownership) and private entity Ciner Group, which holds the bulk
of Etis ownership at 74%.
Eti Soda, which was created in
1998, burst onto the soda ash scene in 2009 - almost achieving
its 1m. tpa target in its first full year of production. The
company exported 93-95% of its total output, selling 87% of
this to European markets (see Figure 1) - with 40% of
this going to Spain and Portugal alone.
Until then, Soda Sanayii AS was
Turkeys sole producer of soda ash, with a 1m. tpa
synthetic-route plant based in Mersin, in the south of the
2010 was a very important
year for us to get the product right, Sinan Solaklar, Eti
Sodas sales and marketing director, told
IM. Customers are now convinced that we
are a reliable source of soda ash for Europe and the Middle
Etis foothold in the European
market has been to the detriment of established soda ash
sources, such as UK-based Brunner Mond (owned by Tata
Chemicals). Brunner Mond closed its 420,000 tpa capacity
Delfzijl operation in the Netherlands in September 2009.
At the time, a Brunner Mond
spokesperson said that the Delfzijl plant had been operating at
a loss since 2003, owing to a number of factors including
increasing energy and other raw material costs, and the
highly competitive market environment for its
products - no doubt worsened by the entrance of a new low-cost,
natural soda ash player.
Critics at the time saw Etis
ambitious production targets as reckless - flooding the market
with new product during the peak of the recession. But now it
appears the strategy was successful, and perhaps Europes
cries of soda ash oversupply were too strongly
Glass demand strong
Although domestic markets account for only 5-7% of Etis
output, domestic glass production could be a significant
consumer over the next few years, with Turkish glass producer
Sisecam revealing it is looking to make major investments in
2011, in line with its plan to expand its market in Asia and
the Middle East. In addition, Sisecam is aiming to be in the
top five of flat glass producers globally; it is currently
ranked seventh globally and fourth in Europe.
In 2010 the company reported a
growth of approximately $0.45bn from 2009 to $2.80bn. This is
marginally below 2008 levels ($2.88bn), but precedes
pre-recession levels. Growth is mainly driven by exports and
foreign production, which follows planned investment in the
This includes the completion of a
new furnace in the companys Russian plant for glass
packaging and investments into the companys joint venture
with French construction giant Saint Gobain.
Meanwhile in Turkey, the company
will add a fourth furnace to the Yenisehir plant for glass
packaging. In Trakya, Bulgaria, additions will be made to the
companys second float line for flat glass.
The group said that it wished to
expand to a wider geographical area and increase product
diversity with a focus on processed flat glass through
strategic alliances and acquisitions.
China is the worlds leading soda ash producer, sourced
from companies such as Shandong Marine (2.5m. tpa capacity) and
Tangshan Sanyou (2m. tpa capacity). It has rapidly emerged onto
the soda ash marketplace - its capacity doubled to 24m. tpa in
only a decade - although most of the countrys production
is consumed domestically.
In the last few years its presence
on the export scene has picked up, however, and in 2008 Chinese
producers shipped over 2m. tonnes of soda ash to deep sea
markets. This export growth has been a cause for concern for US
suppliers, which have traditionally held much of the exports to
the Asian soda ash sector.
Yet the balance of power is shifting again.
A couple of things have changed over the past few
years, FMCs Bill Breunig told IM.
Chinese costs - well documented on energy, labour - have
continued to increase. The renminbi continues to strengthen. So
when we compete with the Chinese in the Asian market our
competitiveness has increased - were able to compete with
Regionally, what we see is
growing demand in China, which will probably be up about 8%
this year, to around 20m. tonnes - that the biggest growth
engine, Breunig explained. The rest of Asia has
been strong so far, up around 3-4%, although this has been
weighted down by Japan.
Leading producer Solvay has also seen a shift in the Chinese
market, with Vincent Decuyper commenting that demand was
quite flat in the first part of 2011. However,
Decuyper added that the demand slowdown had been accompanied by
even stronger constraints from the Chinese
government on the soda ash industry.
There are even rumours now
that no new soda ash production unit could be allowed for the
time being, Decuyper said in the analyst conference call,
adding that the Chinese government was considering forbidding
any further increases in soda ash capacity - in line with the
countrys energy policies.
The Chinese governments
attitudes to soda ash production, while officially leaning
towards curtailment, are often difficult to predict.
Chinas 12th five-year plan, for the first
time, changed the soda ash industrys classification to
that of energy-intensive - these industries are
urged not to invest in production for purposes of export,
because they are essentially exporting energy outside the
But overseas producers are
sceptical. I question Chinas ability to execute on
the contents of its five-year plan, FMCs Bill
Breunig told IM.
You get conflicts at a local
level when theres someone who wants to invest in a soda
ash plant, and they want to encourage employment, and give
incentives through tax etc, but the plants seem to get built
even though they dont meet certain criteria of the
central government, he said.
However, the central
governments harsher stance may be having some effect. It
is understood that the year-to-date Chinese exports are
annualising at about the same level as 2010, despite forecasts
that the countrys exports this year would increase -
partly because the USA was supply-constrained.
So far, over the last two
months especially, Chinese exports were just about 100,000 tpm
whereas normally we would expect them to be more around 150,000
tpm, an exporter told IM. Chinese
producers were at this level earlier in the year but over the
last couple of months this level has dropped back.
He added: Producers seem to
want to get better value for their products.
Arguably, end user demand is the one factor not troubling soda
ash producers at present. One UK trader told
IM: End user markets have projected
higher demands and all of our clients are performing beyond
The European market was slow
due to the construction industrys decline, but this has
now picked up, and the UKs flat glass market is
performing well due to depreciation of the sterling, he
High demand has been echoed
worldwide. Tata Chemicals Zarir Langrana concurred:
Both the container and flat glass markets across the
globe have returned to growth and in the developing regions new
fresh investments are being made to grow these businesses on
the back of strong fundamentals.
The detergent market too
remains healthy and consumer demand is strong driving the use
of effective ingredients such as soda ash, Langrana told
IM. The minerals and mining industry
across most regions has also now recovered and will further
fuel the demand for soda ash together with newer applications
in the lithium, shale gas, and air pollution abatement
Langrana revealed that prices have
firmed throughout the year in all markets, with strong
signals from producers that their top priority is
managing input cost pressures - both raw materials and energy -
in a manner that ensures reinvestment in growing
their business to keep pace with increasing soda ash
This would mean further
upward realignment of pricing, moving forward, supported by
favourable market dynamics, Langrana explained.
The key issue for European
producers is keeping production costs down and profits up.
Domestic demand is improving and exports are healthy - so
producers should have the power to implement price rises, if
supply/demand remains balanced.
Of course, any increase in prices adds to the temptation for
Chinas muted export market to surge its output once more
- though considering US production is cheaper at present, this
could lead to a pricing stand-off between the two regions. The
question is who is more likely to sacrifice profits in favour
of market share.
Selected soda ash supply
Soda ash at a glance
Soda ash, or sodium carbonate (Na2CO3),
is an alkali chemical that can be produced from
naturally-occurring sources (such as the mineral, trona, or
sodium carbonate-bearing brines) or produced synthetically from
several chemical processes - normally the Solvay process,
utilising salt, lime, coal, and ammonia. Sodium bicarbonate is
an intermediate product of synthetic soda ash production that
may be separated.
Soda ash grades
Dense soda ash: used in flat glass, container glass
and detergents as a premium quality product that has a high
sodium carbonate content combined with very low levels of
impurities such as chlorides and iron. Particle size is around
250-300µm with a pouring density of
Medium dense soda
ash: used primarily in detergents and chemicals as an
alternative to dense soda ash or synthetic light soda ash.
Medium dense grade can absorb high levels of liquid, and unlike
lighter synthetic soda ash it does not have the same dust
issues. An advantage of medium dense soda ash is that it can be
shipped in bulk rather than in bags.
Light soda ash:
used primarily in detergents, with a particle size of 80-100mm
and a pouring density of 500kg/m3.
production and processing of soda ash co-produces additional
sodium compounds such as sodium bicarbonate, sodium sulphite,
sodium tripolyphosphate, and caustic soda.
Glass manufacturing: glass production accounts for
almost 50% of global soda ash demand, divided roughly into 21%
flat glass, 22% container glass, and 6% other glass, according
to Harriman Chemsult.
Soda-lime silica glass is the most
common glass type, which itself is used in automobiles and
windows (flat glass), glassware, lighting, televisions, and
other specialist goods.
Soda-lime silica glass combines
silica sand (the oxide) with lime (chemical stability), while
soda ash is the flux used to reduce the melting temperature of
Dense soda ash is an ideal product
for glass manufacturing because the particles are similar in
size to silica sand. This enables a homogeneous mixing of raw
materials and results in a high quality end product.
soaps: medium dense or lighter soda ash grades tend to
be used in detergents, which accounts for around 15% of soda
ash demand. The chemical is a common additive in many
detergents and cleaning products, as it prevents hard water
from bonding with the detergent and is effective at removing
grease and stains from textiles. Soda ash also adds benefits as
an agglomerating aid, a carrier for surfactants and as a source
of alkalinity for pH adjustment.
15% of soda ash production is used in chemicals, as it is the
least expensive soluble alkali and is a good source of sodium
ions for the production of sodium phosphates, sodium silicates,
chrome chemicals and photographic chemicals.
Soda ash is used in the production
of sodium bicarbonate, which itself serves numerous markets
including beverages, coatings, detergents, food, dialysis, and
personal care. Soda ash may also be interchangeable with
caustic soda in applications such as pH adjustment, acid
neutralisation, and flue gas desulphurisation.
Other markets: plastic foams, fire
extinguisher powder, animal feed.
Soda ash end markets (48.5m. tonnes in
Source: Harriman Chemsult, 2010
Soda ash price trends
Burgeoning demand and rising energy costs have led to higher
soda ash prices globally. This, in turn, has led to some
producers adjusting their 2012 outlook as the market continues
For 2012, at least in Europe,
we are going to have a real shortage of soda ash, one
European producer divulged to IM. The
price increase is estimated to be more than
Volumes of soda ash are very
good; we are running at full capacity and out of stock,
the producer said.
In the USA, ANSAC - the
American soda ash group that handles production from three of
the countrys producers - raised its prices by
$50/tonne at the start of Q3 2011.
Meanwhile, Australian producer
Penrice upped prices by $25/tonne on 1 August. Its new list
prices are: A$560/tonne for dense soda ash (bulk), A$640/tonne
for light soda ash (bulk), and A$680/tonne for packaged soda
ash, all ex-works, Osborne, South Australia.
The consensus on the marketplace is that soda ash prices
will continue to rise owing to high demand and tight market
conditions - compounded by Solvays recent force
majeure incident in Wyoming, USA (see table -
supply developments), estimated to have affected 10,000
tonnes of supply.
Soda ash prices, 2009-2011