Soda ash: rising from the economic cinders

By Emma Hughes
Published: Friday, 21 December 2012

The financial downturn that has plagued manufacturing industries around the world for almost four years is finally drawing to a close. Yet, while economies were beginning to lift towards the end of 2012, many core mineral-consuming industries remained weakened in the aftermath of the downturn – and soda ash was no exception. IM digs down into this topic to uncover the true impact of this recession. Emma Hughes, Deputy Editor

Soda ash was largely affected by the economic struggles experienced since 2008, especially given that many of its end markets, made up of staples such as glass, detergents and chemicals, were hit by a crash in the housing market.

Weak end-user demand ensuing from the global economic downturn has had a direct impact on global soda ash demand and soda ash pricing - though a recovery is starting to become evident.

Despite the hardship experienced in recent years, many soda ash producers remain optimistic about the future, with some expecting a rapid recovery in consumerism, and therefore soda ash end-user demand, in 2013.

“The global economic problems did hurt the world end-use markets, and in turn, the world soda ash producers. It appears the worst is over now and production and consumption [levels] are increasing,” Denis Kostick, US Geological Survey (USGS) mineral commodity specialist, told IM.

Zsig Schneider, Tata Chemicals North America senior VP sales and marketing , echoed Kostick’s sentiment, stating: “Soda ash in general is in a slump [...] it is a commodity chemical and the pricing and demand runs concurrent with GDP activity.”

The India-headquartered company is in a strong position to comment on global soda ash market developments, as it operates soda ash facilities in India, Kenya, the UK and the US, with a combined capacity of 5.5m tpa - making it the world’s second-largest producer, after Solvay Chemicals.

Tata believes the soda ash market is at the end of the down-cycle and that while prices have hit a base rate, they are tending to go up now, the company said.

One of the US’s leading soda ash producers, FMC Corp. shared this optimism, saying that its business has performed well in the aftermath of the economic recession.

“Exports continue to be an important part of our business. Both domestic and export pricing is up year-over-year in 2012,” the company told IM.

Global soda ash supply

While 2013 promises to bring change in the form of increased demand and price rises for the soda ash market, the supply situation is expected to remain largely the same as the period before the economic recession hit.

China continued to dominate the world’s soda ash supply in 2012, producing 23m tonnes in 2011, according to the latest data from the USGS. The country was followed by the US, which produced 14.5m tonnes in 2011, with a total value of approximately $1.3bn. “China continues to be the largest and fastest-growing market for soda ash. Due to its size and the persistent over-capacity in the Chinese industry, it also has a strong impact on important markets for soda ash trade - Asia, and to a lesser extent, Latin America,” the Wyoming, US-based producer FMC Corp. told IM.

However, while the usual players are continuing to produce in-line with expectations, there are new entrants to the market, including some from developing countries.

“In developing countries, the soda ash [market] is growing by 5%, in the US and Europe demand is stable. Total growth is 2m tpa - 1m tpa in China [and] 1m in the rest of the world,” Novacarb, the France-based soda ash producer, told IM.

Turkey is one such country that emerged as a key soda ash producer in 2012, with more than 2m tonnes of capacity logged in 2011.

“China continues to lead the way for new capacity coming on-stream and Turkey has emerged as a new player with good access to European and Middle Eastern markets,” Kostick told IM.

Global soda ash demand

Demand for soda ash, as with many minerals, is driven largely by the end-use markets it supplies (see table 1) and therefore, any change to the global economic state can have a significant impact.

End markets are vital to soda ash, but also vulnerable to economic downturn. The mineral’s main end-use market - glass - was hit hard by a crash in the global housing market during the period 2008-2012. This collapse caused the demand for soda ash to dip to the point where prices for the mineral were as low as they can feasibly go.

Other glass-using industries, such as automobile manufacturing, also took a knock, which again filtered down to the soda ash demand level. Container glass demand remained fairly steady, however, although this makes up only a small percentage of the world glass supply.

As 2012 ends and 2013 approaches, it appears these end markets are recovering. For example, 23 housing markets have demonstrated better year-on-year statistics in Q3 2012 compared with Q3 2011, according to a recent report by Global Property Guide.

Recovery of the US housing market has been particularly evident, with growth in Q3 2012 being the highest since Q2 2006, according to the Federal Housing Finance Agency (FHFA),the Guide reported.

“The supply and demand balance is rebounding after the global economic problems that began a couple years ago,” Kostick said.

“Soda ash is used in many consumer products that grow parallel with the GDP and population trends in the developed regions (US, Europe, and so forth), whereas in lesser developed nations (parts of South America, Asia, Middle East) the growth rates are stronger and the demand for consumer products is favourable,” he added.

Market Challenges

While soda ash is beginning to rise from the cinders created by the global economic downturn, the market is not without its restrictions - recession or not.

One of the main challenges soda ash faces, as with many minerals, is high logistics costs. Due to its high bulk and low-cost value, the mineral’s transport costs are an unwelcome problem, most notably in China.

Novacarb described the soda ash market as “a global business with local constraints due to high logistic costs”, adding that at present the transportation cost makes up approximately 20% of the mineral’s delivered costs.

“The soda ash business is Capex intensive and has high fixed costs, so the 2008/2009 and the new, mid-2012 crisis [are making it difficult to maintain our plant],” the company told IM.

Novacarb, along with many other companies, is in the process of diversifying its business strategy in order to cope with the changing market.

“New constraints in Europe, including the CO2 emissions trading scheme, are [adding] more costs to European producers in comparison with others. So, our strategy is to go downstream with sodium bicarbonate (30% profitable growth per year during the past four years) and other areas (detergent products),” the company said.

The soda ash industry in the US has also had to deal with growing competition from China, which is dominating the supply to the Far East markets, Kostick told IM.

Soda ash outlook

Despite the ups and downs experienced by the soda ash market during the past four years, the outlook for this mineral remains positive.

Some of the world’s leading producers are predicting an uptick in prices at the beginning of 2013, as a recovery in the mineral’s main end markets strengthens.

“Soda ash demand will continue to grow, particularly in Asia and Latin America, as these economies continue to develop, and construction activity grows along with increased demand in soda ash for detergents and chemicals,” FMC Corp. told IM.

“Demand is also expected to grow in North America, with a recovery in the housing sector, which is already underway,” the company added.

“I believe the market is recovering, but is still about another two years away from where the markets used to be,” Kostick told IM.

“I am, and always have been, gung ho on the future of soda ash,” he added.

Table 1: Soda ash end uses

Glass (flat and container)

The glass industry is the largest consumer of soda ash - especially the glass container (bottles, jars and so forth), flat glass and automobile sectors. The mineral is used in glass manufacturing as a fluxing agent as the sodium oxide content helps to reduce the temperature at which the raw materials, such as silica sand, melt. During the manufacturing process, the soda ash decomposes to sodium oxide and carbon dioxide, which rises through the glass melt and helps to mix the ingredients.

Chemicals

The inorganic chemicals industry is the world’s second-largest consumer of soda ash. Some examples of these chemicals are:

Sodium bicarbonate (baking soda): is used as a household consumer product and is manufactured by percolating CO2 gas through a carbonation tower containing a soda ash solution. Approximately 0.68 tonnes soda ash is needed to make one tonne sodium bicarbonate.

Sodium hydroxide (caustic soda): is mainly produced as a co-product with chlorine gas in the electrolysis of salt brine in mercury, diaphragm, or membrane cells. Non-electrolytic caustic soda, also known as chemical caustic soda, is produced by Green River soda ash producers in Wyoming, US. Chemical caustic soda is produced by the reaction: Ca(OH)2 + Na2CO3 CaCO3 + 2NaOH.

Sodium sesquicarbonate: is a hydrated compound containing soda ash and sodium bicarbonate. This chemical is mainly sold to the detergent industry.

Sodium chromates: is formed by roasting chrome ore with soda ash in a rotary kiln to produce sodium chromate or sodium bichromate. For every tonne of sodium bichromate produced, 0.79 tonnes soda ash is needed. Sodium chromites are used in leather tanning, pigments, wood preservatives, drilling mud additives and more.

Sodium phosphates: have exceptional cleaning properties and are used in baking powder, carbonated beverages, milk products, dental materials, fire-retardants, metal surface treatments and water treatments.

Sodium silicates: is produced from silica sand and soda ash in a process similar to glass manufacture except that the sodium silicates are water soluble and glass is not. Sodium silicates are used in soaps and detergents, silica-type catalysts and gels, pigments, paper adhesives, water, paper, ore treatment and other end uses.

Soaps and detergents Soda ash is used both directly and indirectly in detergents. Firstly, it is used as an agglomerating aid, surfactant carrier and source of alkalinity. Secondly, it is used as a feedstock to enhance the cleaning action by tying up the calcium and magnesium ions to improve surfactant activity. Lastly, soda ash is used to soften laundry water.

Pulp and paper Soda ash is used in pulp digestion and bleaching operations and in paper-coating formulations.

Water treatment Soda ash is used to chemically alter the pH of municipal and industrial water supplies, and as a precipitant to remove impurities in brine and industrial process water.

Source: Industrial Minerals and Rocks, 7th Edition

Quick soda ash facts

Soda ash, the trade name for sodium carbonate (Na2CO3), is a white, anhydrous, powdered or granular material. It is an essential raw material used in the manufacturing of glass, detergents, chemicals and other industrial products.

Soda ash has been used for thousands of years and its industrial manufacture began in the 18th century.

There are two types of soda ash: natural and synthetic. Natural soda ash, refined

from the mineral trona, is regarded as the standard for quality and purity and is also processed from sodium-carbonate-bearing brines. Synthetic soda ash is manufactured using a number of different chemical processes.

Soda ash also comes in three main grades: light, medium and dense. These have the same chemical properties and only differ in physical characteristics, such as bulk density, particle size and shape.

Pricing

Soda ash pricing levels have also been largely impacted by the economic state, with low demand pushing prices down. Now, as the economy begins to recover, prices are expected to rally.

Pricing in North America, South America and Europe has been relatively flat through 2012, while in China and the rest of Asia, excluding India, prices have declined significantly during the year due to a slowdown in demand growth, FMC Corp. told IM.

Towards 2013, pricing is expected to be up in North and South America, and relatively flat in Europe, the company said, adding that in Asia, levels have hit the bottom, with Chinese producers selling below cash costs just to keep their plants running.

“This is unsustainable, particularly in face of rising costs, and consequently prices in China and Asia are expected to rise over the course of 2013,” it said.

“Increased global demand, along with rising costs of synthetic soda ash production [particularly in China], will lead to an environment of continued upward pressure on soda ash prices globally,” the company added.

Natural soda ash is expected to continue to have a delivered-cost advantage relative to synthetic soda ash in all regional markets, FMC Corp. said.

“In fact, this competitive advantage is expected to grow,” it added. The USGS’s Kostick saw further reason for optimism.

“Domestic pricing of soda ash is about $130-$140/s.ton in the US for this year. With exports now exceeding domestic consumption, soda ash producers are experiencing better prices than before. I do not believe the price will go down, pending another recession that might result from the ‘Fiscal Cliff’ the US may have next month,” he said.

Tata Chemicals, which is also positive about prices going up in 2013, believes its business is relatively protected from the negative impacts of market fluctuations.

 IM’s list prices for soda ash can be seen in the table below:
 
“Tata Chemicals’ business is predominantly based in low-cost, natural production, so we’re not as exposed as synthetic producers elsewhere in the world. Our soda ash business is still doing pretty well,” the company told IM.

Tata expects pricing to improve in Q2 2013, ‘if not sooner’.

“[...] there will still need to be some inventories that will need to be picked up before [pricing increases], but [our] view is [that it will happen in the] second quarter of 2013,” the company said.

“If you look at the end-use markets that have a direct impact on glass consumption, it would be housing and automotive. When you see those end markets pick up, you’ll see an increase in soda ash demand to the segments that supply that,” the company added.