The global soda ash industry is
undergoing significant structural change, characterised by
shifting capacity, the impact of rising costs for synthetic
soda ash producers and developments in core markets.
According to global industrial
research group IHS, which publishes an annual study covering
historical trends as well as ten-year supply and demand
forecasts for soda ash, global annual consumption is expected
to rise to 76.5m tonnes by 2024, compared with 55.5m tonnes in
Figures from the US Geological
Survey (USGS) peg world soda ash production (natural and
synthetic) in 2013 at 53.2m tonnes, up from 52.9m tonnes in
2012. Of this, approximately 75% is derived from synthetic
processes, while 25% is produced naturally, principally from
deposits of the mineral, trona.
Worldwide average demand for soda
ash is expected to increase by 3.3% per year between 2014 and
2024, IHS analysis shows, driven by increased consumption
in the recovering construction and automotive industries, with
China, the worlds largest soda ash producer, contributing
almost 4% year-on-year growth to 2024.
Glass markets, which account for
more than half of global demand, are expected to remain the
dominant end use for soda ash, while chemicals and detergents
will also remain important downstream consumers.
Patterns of trade for soda ash are
beginning to experience more seismic adjustments, meanwhile, as
higher cost production centres become displaced by cheaper,
alternative sources, particularly in Europe and Australia,
where domestic output makes way for supply from Turkey and the
The closure of 360,000 tpa capacity
at Tata Chemicals Magadi soda ash plant in in Kenya in
June, which mainly supplied the Indian market, with a large
part going to the glass industry, has caused soda ash prices to
rise in India, Vincent Pedailles-Ledoux, senior analyst at IHS,
explained to IM.
The Magadi plant was idled
because of high energy costs. Local producers can try to
increase production, but the closure left a big gap to fill in
India he said.
However, as Pedailles-Ledoux points
out, the Kenyan facility has only been mothballed in response
to current industry pressures, and Tata may bring the plant
online again in the future.
companys cost pressures were not only felt in Kenya. In
February 2014, Tata also closed its 560,000 tpa Winnington soda
ash plant in the UK.
This contributed to the UKs
soda ash imports rising by 155,000 tonnes in the first five
months of 2014, more than three times higher than the
corresponding total in 2013, when imports stood at 50,000
Of this, 40% was imported from
Turkey, and 27% from the US, with the remainder coming from
Poland and handful of other sources.
Elsewhere in Europe, in Portugal,
the closure of Belgium-based Solvays 230,000 tpa Povoa
plant in 2013 has resulted in a near-400% increase in imports
between January and May this year, compared to the same period
last year, as the country effectively no longer has any local
On announcing its decision to shut
Povoa, Solvay said that the closure was part of a plan to
rationalise its European soda ash operations and improve
profitability, while expanding its lower-cost output capacity
in Wyoming, US, by around 12%.
Australia, meanwhile, saw the loss
of Penrice Soda Holdings 340,000 tpa Osborne chemical
plant earlier this year, which Pedailles-Ledoux explained was
one symptom, amongst others, of the downturn in
Australias domestic glass industry.
In the countrys container
glass market, for example, demand has been impacted by
changes in the way the country exports
Australian wine is now
exported in bulk, rather than in individual bottles, meaning
that the local container glass market is pretty weak,
Pedailles-Ledoux said, but stressed that the wine trade is just
one contributing factor to the Australian glass markets
overall weakness, which is also affecting flat glass.
Powder detergents, another
important market for soda ash, are also losing favour in
developed economies worldwide as consumer preferences shift
towards using liquid detergents.
As part of a trend observed
globally, in Australia this has meant that most of its formerly
domestic detergent producers have moved to Asias emerging
markets where production costs are lower and cheaper, powder
products still account for the majority of detergent sales.
Australia now imports around
300,000 tpa soda ash, mainly from the US, as a cost-effective
alternative to producing it locally.
Cost challenges in China
While global demand for soda ash is
on a broadly positive trend, Chinas domestic soda ash
industry is struggling against a number of operational factors
that are making local production an unprofitable business.
Prices for soda ash follow
cost, Pedailles explained. The US has a huge
advantage because of its low gas prices - these are expected to
stay low for at least the next 10 years.
China produced approximately 24.5m
tonnes soda ash in 2013, of which IHS estimates 98% was
High raw material costs,
particularly for salt, have had a negative impact on margins in
China. Lower coal prices have meant that Solvay-based producers
are no longer operating at a loss, but have not helped
Hou-based producers back to profit.
The main issue for companies that
use the Hou process is the cost of ammonia and the credit they
receive from by-produced ammonium chloride.
In the past, the credit received
from ammonium chloride in China covered the cost of ammonia for
soda ash producers, but this ceased to be the case in 2008 and
shows no near-term signs of rectifying.
Today, the credit Hou-based
producers receive for ammonium chloride is two and a half times
lower than the cost of ammonia.
This, Pedailles explained, is
partly due to oversupply in the ammonium chloride and urea
Estimates from major fertiliser
producers and market tracking services suggest that urea prices
are set to remain weak into at least 2016, thanks to structural
oversupply in China, which in turn is likely to hold back the
price of ammonium chloride and the corresponding credit for
Hou-based soda ash producers.
China exported the same
volume of urea in the first two months of 2014 as it did in the
first half of 2013, US fertiliser company Agrium Inc.
noted earlier this year, adding that Chinese shipments
will be a key driver of the world urea market this
Pedailles-Ledoux said that while
some Chinese soda ash plants may be subsidised by local
governments, the country is likely to see part of its capacity
shut down in the next few years as operating costs make many
US soda ash - a natural advantage
Soda ash is the US largest
inorganic chemical export, with shipments totalling around 6.5m
tonnes in 2013, or around 58% of the countrys total
production of 11.4m tonnes, according to the USGS.
All of the countrys natural
material is produced from large trona deposits, mined and
processed by four companies in Wyoming (FMC Corp., OCI
Chemical, Tata Chemicals and Solvay) and one in California
(Searles Valley Minerals), all of which benefit from low energy
costs coupled with stable domestic and strong export
South America and South East Asian
markets are among the biggest consumers of US-produced soda
ash, receiving 1.8m tonnes and 1.3m tonnes of exports,
respectively, in 2013, data compiled by IHS shows.
The proximity of US soda ash
exports to South America has negated the need for local
capacity in this region, with a small amount of production from
Argentinean producer, Alpat, being the continents sole
Europe is also importing more and
more US soda ash, following the closures of its own local
Turkeys projects face
While naturally produced US soda
ash remains among the lowest cost in the world, Turkey is
likely to become an increasingly important supplier to the
European market as it develops large domestic deposits of
USGS figures show that Turkey
produced around 1.8m tonnes soda ash in 2013. IHS estimates
that the local market consumes around 1m tpa, with 60% consumed
by flat glass production, while 75% of the remainder is
exported to Western Europe and the rest to Russia, the Baltic
countries, India and the Middle East.
It is clear that the new
low-cost Turkish supply with a competitive cost base and low
transport costs - relative to the US producers - will continue
to influence the market. We just do not know yet to what
extent, Marguerite Morrin, director of global soda ash
services at IHS said.
Demand in Turkey is expected
to grow by around 10% this year, led by the glass sector,
We expect exports from Turkey
to decrease in 2015 because they will need more material to
feed their domestic market, he added
A number of projects to increase
soda ash capacity in Turkey are in the pipeline, but most have
missed their scheduled start dates.
Last year, Turkish producer
Star-Kazan Soda Elektrik, part of the Ciner Group industrial
conglomerate, announced plans to build the worlds largest
soda ash production complex in the Kazan district near the
Turkish capital, Ankara.
The trona deposits in this region
are estimated to total around 1.6bn tonnes (at a grade of 30%,
for 296m tonnes contained), with a mine life of around 40
Phase one (1.5m tpa) of the 2.5m
tpa Kazan facility was originally forecast to come online in
2014, but this start-up date has since been pushed back to the
second half of 2018, ramping up to full production the
Work at Kazan for the two
phased soda ash project has not yet started although the land
is reportedly ready for construction, Pedailles-Ledoux
It is the same situation for
Eti Sodas 500,000 tpa project at Beypazari, where the
estimated completion date has also been postponed, he
Etis Beypazari soda ash
plant, which was initially scheduled to come online in 2012,
could be finished in the second half of 2016, according to
Pedailles-Ledoux, although soda ash production in this area is
already well established.
Eti already have 1m tpa
capacity from trona extraction at Beypazari and Soda Sanayii
(Sisecam) has capacity of 1.1m at Mersin, via the Solvay
process, Pedailles explained.
As Turkish soda ash output rises,
to a level where the country can afford to increase exports at
the same time as satisfying growing internal demand, it is
likely to become the supplier of choice for many European
The Turkish trona is very
cheap to extract, Pedailles-Ledoux explained.
Shipping material from Turkey to Northern Europe is still
cheaper, for some, than producing soda ash domestically -
although this varies depending on the country.
According to Morrin,
synthetic soda ash producers are likely apprehensive
about the further Turkish natural soda ash production
developments as its increasing cost competitiveness poses a
threat to the industry, particularly in valuable short-haul
In the meantime, however,
Pedailles-Ledoux warns that the lack of new Turkish capacity
coupled with greater internal demand could result in some
tightening of the European market.
Synthetic soda ash - here
Although naturally produced soda
ash has a number of cost benefits over synthetic material in
regions where it can be easily extracted and delivered, there
is not sufficient supply of natural soda ash to supply the
entire global market.
Synthetic soda ash accounts
for around three quarters of global consumption and is,
therefore, here to stay, Pedailles-Ledoux told
The future of soda ash consumption
is likely to remain dependent on its present key markets,
including container and flat glass, detergents, and chemicals,
such as sodium dichromate and sodium silicates, he added.
Less positive for struggling
producers, he believes that there are no new meaningful
applications for soda ash on the horizon for soda ash -
any new uses that do emerge are unlikely to require
significant quantities, he added.
IHS has recently published its
2015 World Soda Ash Analysis report, which is
now available to clients.