India’s soda ash industry revs up on economic growth

By IM Staff
Published: Friday, 20 March 2015

With installed capacity of around 3m tpa, India is already a significant producer of soda ash for its own domestic needs. But its main market players have ambitions to go increasingly global, Sunder Singh, IM Correspondent, discovers.

Emerging economies have been the primary growth drivers for soda ash over the past decade. With rapidly increasing GDP and urbanisation, these economies have experienced an increased per capita consumption of products that are manufactured using soda ash, including flat and container glass, detergents, baked goods, clean water and sodium-based chemicals. 

India’s soda ash industry, which has experienced almost flat growth in last two years, is gearing up for more positivity on the back of a revival in the country’s economy.  

India produces synthetic soda ash from limestone and salt, having no natural deposits of trona from which to extract natural material.

With an installed capacity of just over 3m tpa, India has emerged as an important supply base for the global soda ash industry, accounting for around 6% of capacity worldwide.  The country produced 2.375m tpa soda ash in its financial year 2013-14. During the same period, India imported 551,000 tonnes soda ash and exported about 86,000 tonnes. 

The Indian soda ash industry constitutes production of two types – light soda ash, mainly used in detergent industry, and dense soda ash, which is principally used to make glass, with shares of 60% and 40% of the market, respectively. 

Almost all the major industry players – around 95% or 2.6m tonnes of India’s installed capacity – are based in the northwest Indian state of Gujarat, due to the proximity and ready availability of the main raw materials used to make synthetic soda ash, namely limestone and salt. The production is spread across five existing plants and at least one new greenfield plant is also planned for the state in the near future.

The remaining 5%, or 120,000 tonnes, is produced from a single plant in southern India.

The 2013-14 financial year in India was a story of two halves for its soda ash industry; pipeline inventories remained high through the first half of the year (April-September 2013) as a result of robust growth in the previous financial year. 

As market demand remained subdued towards the end of 2013, the second half of the period saw stocks being consumed. Overall, the year witnessed a 2% decline in soda ash demand. A total of 551,147 tonnes was imported during the year, mainly from Kenya, China, Bulgaria, Romania and Turkey. The first half witnessed high imports at lower prices, however these decreased in the second half due to the effect of anti-dumping duties.

Table 1: Soda ash consumption and imports in India*

Financial year

2013-14

2012-13

2011-12

2010-11

2009-10

2008-09

Installed capacity

3,076,000

3,076,000

2,451,250

1,961,000

1,961,00

1,961,00

Domestic sales

2,289,134

2,241,786

2,263,478

2,106,300

1,878,538

1,799,799

Imports

   551,147

    690,181

   579,347

    433,685

   555,956

   358,555

Total consumption

 284,0281

2,931,967

2,842,825

2,539,985

2,434,494

2,158,354


*All units in tonnes
Source: Alkali Manufacturers Association of India (AMAI)

Imports

India has adequate capacity to meet its domestic demand for soda ash, but price pressures arising from cheap imports have made competition stiff for domestic producers.  Cheap imports have forced the industry to run at a capacity utilisation rate of less than 80%, with imports constituting a significant portion of domestic demand. 

According to figures from the Alkali Manufacturers Association of India (AMAI), imports of soda ash between April 2014 and January 2015 were 584,000 tonnes, compared to 448,000 tonnes over the same period a year earlier – an increase of more than 30%. Imports during January 2015 were 76,600 tonnes, compared to 36,900 tonnes during the same month in 2014, representing a rise of more than 100%. 

Demand drivers

At around 37% of the market, soaps and detergents account for the highest proportion of soda ash consumption in India, followed by the glass industry at 26% of total consumption. Chemicals make up 21% of the market while a combination of other sectors account for the remaining 16%. 

While demand for soda ash from detergents, chemical and other segments have registered modest growth in the last five years, demand by the glass industry has declined, contributing to the 2% drop in soda ash consumption in the country. 

In 2015, soda ash demand from India’s glass segment is expected to register healthy growth, due to at least three large projects coming on stream. Two of these – belonging to domestic container glass producers Can Pack International and Hindusthan National Glass & Industries Ltd (HNG) – were commissioned in the second half of 2014 while the third – run by France-headquartered Saint-Gobain – is scheduled to start up in the first half of 2015. Besides these three projects, existing glass producers, which have recently been running their plants at low capacities, are also expected to increase capacity utilisation on the back of healthy demand from flat and consumer glass-using industries. 

Table 2: Soda ash usage by end user segments

End market

India usage

Global usage

Soaps and detergents

37%

15%

Flat glass

10%

25%

Container glass

9%

19%

Other glass

7%

6%

Chemicals

21%

9%

Others

16%

20%

Alumina and silicates

-

6%

 

Source: Gujarat Heavy Chemicals Ltd 


Dumping duty on soda ash imports 

Until relatively recently, India’s soda ash market had long been a destination for cheap soda ash imports from some of the world’s major soda ash producing countries. Domestic producers, who were unable to match the cost competitiveness of the producers from these countries, faced considerable barriers in selling their products in the domestic market. They accused the exporters of dumping soda ash in India and ultimately sought the imposition of anti-dumping duties on some of these countries. 

The Indian Finance Ministry imposed a definitive anti-dumping duty on soda ash imports from China, the European Union, US, Iran, Pakistan, Kenya and Ukraine in July 2012 for a period of five years. Anti-dumping duties ranged from $2.38/tonne to $38.79/tonne, depending on the producer and country of export.  The petition seeking an anti-dumping probe into soda ash imports from these countries was filed by AMAI on behalf of domestic companies – Nirma, Saurashtra Chemicals, Gujarat Heavy Chemicals (GHCL) and DCW Ltd. 

In April 2013, the Finance Ministry imposed a definitive anti-dumping duty on soda ash imports from Russia and Turkey, again for a period of five years. Soda ash imports from Russia were landed with a duty of $35.99/tonne, while duties on those from Turkey ranged between $18.39/tonne and $75.16/tonne, depending on the producer. 

K Srinivasan, secretary general of AMAI told IM: "The Indian soda ash industry is going through a hard time due to stagnant growth and incessant imports. A major challenge facing the industry is the slow process in trade remedial measures."

"The domestic industry has taken recourse to approach the government seeking trade protection measures against imports. However, the process is long-drawn, cumbersome and too complicated compared to the process in other countries," he added. "The process needs to be simplified and speeded up. Often, by the time protection measures are put in place, the industry has already suffered huge damage."

Srinivasan explained that many soda ash producing countries that have huge or surplus capacities view India as an easy dumping ground for their products. 

"This, together with the large number of foreign trade agreements (FTAs) that India has, makes for easy access. The Indian market offers a huge potential and it is for the Indian government to provide a level playing field to domestic manufacturers and ensure the success of the 'Make in India’ programme," he said.

Table 4: Indian and Chinese soda ash prices 

Grade

Price/tonne

Indian synthetic soda ash, imported, dense

$240-290

Indian synthetic soda ash, imported, light

$300-340

Indian synthetic soda ash, domestic, dense & light, ex-works India

$290-310

Chinese synthetic soda ash, dense & light, FOB China

$220-30

 

Source: IM Prices Database (March 2015) 


Nirma capacity expansion

Established Indian soda ash producer, Nirma, which currently has the capacity to produce 700,000 tpa, is in the process of expanding its production capability at its Gujarat-based facilities. At present, Nirma can produce 2,000 tpd light and 1,200 tpd dense soda ash. The proposed expansion will add 800 tpd light and 600 tpd dense soda ash capacity to the company’s installed capacity.  

Nirma applied for environmental clearance for the upgrade from the government in November 2014. The proposed expansion will cost around $237m, which also includes expanding the output of its caustic soda business and captive power generation.  

Rohit enters market

One of the major detergent producers in India, Rohit Surfacnt Pvt Ltd (RSPL), is in the process of setting up a greenfield soda ash manufacturing plant in the Dwarka district of Gujarat. RSPL, which is based at Kanpur in the neighbouring state of Uttar Pradesh, claims that it has a market share of about 15% in India’s detergent market. 

Coming with an outlay of Indian rupee (INR) 18bn ($330m**), RSPL’s plant is likely to become operational  by mid-2016 and will have the capacity to produce 1,500 tpd light and 770 tpd dense soda ash. RSPL’s plant will also house a 50MW coal-based captive power plant. 

Structural weakness in India’s soda ash industry

The Indian soda ash industry is hampered by having 95% of its production capacity concentrated in Gujarat, which lies close to the country’s western coast. The cost of transporting soda ash to major consuming markets in the south, north and east of India, which together constitute about 60% of domestic consumption, is high. Ocean freight is often cheaper in comparison to domestic overland freight for southern and eastern markets, both of which lie near to major sea ports.  

Sourcing key raw materials like limestone and salt are also beginning to pose major challenges for soda ash producers in the country.  No fresh limestone mines or land bank for salt works has been allotted by the Gujarat state government in the last three years. 

Global ambitions of Indian producers

Looking beyond the domestic market, Indian soda ash producers have extended their reach to a number of other countries in recent years. This trend towards overseas expansion was started by Tata Chemicals, when it acquired UK-based Brunner Mond Group (now known as Tata Chemicals Europe) and Kenya-based Magadi Soda Co. (now known as Tata Chemicals Magadi) in 2005. 

In 2008, with the acquisition of US-based General Chemical Industrial Products (now known as Tata Chemicals North America), Tata Chemicals became the second largest global producer of soda ash after Belgium-based Solvay.

Currently, Tata Chemicals has an installed capacity of approximately 4.3m tonnes soda ash across its manufacturing facilities in India, UK, Kenya and the US, making it the world’s most geographically-diversified soda ash company, with more than a 7% share of global capacity. 

Around 70% of Tata’s soda ash capacity is comprised of natural soda ash production. Its natural soda ash operations are located at the Green River Basin, Wyoming, US and Magadi, Kenya. The company produces its synthetic soda ash at Mithapur, India and Northwick, UK. 

In Europe, GHCL bought a 300,000 tpa capacity soda ash plant from C Bega Upsom SA in Romania in 2005. 

Nirma commenced its international growth strategy when it acquired the soda ash business of US-based Searles Valley Minerals (SVM) in 2007. This business has three soda ash manufacturing facilities in California
with an installed capacity of 1.1m tpa. Recently, Nirma was also in talks to buy FMC Corp.’s soda ash business, also in the US, however pigments and chemicals company Tronox eventually acquired the division for $1.64bn.

**Conversions made March 2015

India’s major soda ash producers

Indian soda ash manufacturing is dominated by four large producers, all of which are located in the state of Gujarat. One small producer, Tuticorin Chemicals and Fertilisers, is located on the southernmost tip of the country at Tuticorin in the state of Tamilnadu.

Table 3: India’s top soda ash producers

Company name

Location

Installed capacity (tpa)

Tata Chemicals

Mithapur, Gujarat

875,000

Gujarat Heavy Chemicals Ltd (GHCL)

Junagadh, Gujarat

850,000

Nirma

Bhavnagar, Gujarat

650,000

Saurashtra Chemicals

(Acquired by Nirma)

Gujarat

490,000

Tuticoron Chemicals & Fertilisers Ltd

Tuticorin

(Tamilnadu)

115,000

DCW Ltd

Dhrangadhra, Gujarat

96,000



Tata Chemicals

Tata Chemicals is world’s second largest and most geographically spread soda ash producer, with manufacturing locations in four continents and a global soda ash capacity of 5.3m tpa. In India, Tata’s manufacturing facility is located at Mithapur in Gujarat. The Mithapur plant has the capacity to produce 875,000 tpa soda ash. 

Nirma

Better known as the company which shook up the Indian detergent industry with its rapid ascent from a small producer to market dominance, Nirma is the largest detergent maker in the country with a market share of 38%. Its soda ash plant at Bhavnagar in Gujarat has a capacity of 650,000 tpa soda ash. 

Gujarat Heavy Chemicals Ltd (GHCL)

Located at Junagadh in Gujarat, GHCL has capacity to produce  850,000 tpa soda ash. During the financial year 2013-14, the company produced 712,000 tonnes.