ash industry has set its sights on a larger share of
the global market. Although it has scaled back its capacity
expansion plans considerably in the last year, production
levels are still rising and the country’s
producers are looking for external markets to offload material
that cannot be consumed domestically.
According to Marguerite Morrin, senior director of chlor alkali
and soda ash at IHS Chemical, China produced 25.28m tonnes soda
ash in 2014, although total capacity in the country stands at
around 32m tonnes. IHS estimates that China exported 7-8% of
its soda ash production last year, with 90% going to Asian
markets: of this, 17% went to the Indian sub-continent; 27% to
northeast Asia; and 45% to Southeast Asia.
Chinese exports to Asia are increasing and, significantly,
encroaching on the market share of the American National Soda
(ANSAC) – the marketing body in charge of exporting
US-produced soda ash. For its part, the US produced around
11.66m tonnes soda ash last year and is the single biggest
exporter of the material in the world, accounting for 49% of
all soda ash traded globally. Around 36% of US exports go to
Asia, having increased significantly since 2011. In 2014, US
soda ash exports were higher by 43%, or 348,000 tonnes, than
they were in 2011, whereas Chinese exports had only increased
by 18%, or 137,000 tonnes, over the same period.
Soda ash is mainly used in glass and detergents. A
decline in glass consumption and excess soda ash capacity
in China is shifting more material into export markets
This year, however, China has been much more aggressive with
its exports, and its share of the Asian market has grown much
more rapidly than that of the US.
"In the first five months of 2015, the US was still a bigger
supplier to the rest of Asia (excluding China) than China,"
Morrin told IM. "But Chinese volumes to
Asia have increased by 200,000 tonnes, or 34%, whereas US
exports in this period only grew by 33,000 tonnes, or 3%."
"The single biggest increase in Chinese exports in the first
six months of this year was to Indonesia, where volumes
increased by 52,000 tonnes, or 73%. The second biggest increase
was to Bangladesh, with volumes up by 48,000 tonnes, or 66%,"
China’s soda ash industry is at a cost
disadvantage compared to the US, which produces the material
from natural mineral (trona) deposits in Wyoming.
China, by contrast, has very little natural soda ash production
and makes most of its material synthetically from limestone and
salt, using either the Hou process (developed by Chinese
chemist, Hou Debang, in the 1930s, which produces ammonium
chloride as a by-product) or the Solvay process (developed by
Belgian chemist Ernest Solvay in the 1860s, requiring less
energy and fewer raw material inputs than the Hou process, but
without the ammonium-chloride by-product).
According to Morrin, in 2014, 45% of Chinese soda ash was
produced via the Hou process while 48% came from the Solvay
The increase in Chinese exports is due to a combination of
excess domestic capacity and a decline in local demand. Because
the main market for soda ash is glass manufacturing, its
consumption is linked to the construction market, which has
effectively stalled in China.
According to the RICS China Construction Market Monitor,
Chinese construction stabilised in the first quarter of 2015,
after two consecutive quarters of decline. Early indications
for Q2 suggested that the market remained flat during this
period, although house prices had started to inch up.
"Continuing weakness in the wider economy has affected the
prospects of the construction industry. More specifically, the
residential and commercial markets have witnessed a continued
downward trend, which is unlikely to improve notably this
year," said Andy Wu, senior economist at RICS.
"Looking ahead, the construction market is expected to remain
flat at best this year and then show some pick-up next year,"
Wu added. This, combined with a slumping automotive market,
which contracted by 6.6% in July, has had a knock-on effect on
the glass industry.
Nearly a quarter of all Chinese glass companies saw their
profits shrink in the first half of 2015. For flat glass,
Chinese production dropped by 3.9% year-on-year (y-o-y) in H1
this year, while annual demand growth declined from 11.3% in
2013 to 1.1% in 2014, and is expected to fall into negative
growth this year, pushing the market into depression and
leaving a gap in soda ash demand.
Even though the country already produces more soda ash than it
consumes and prices are falling, production capacity continues
to rise at a rapid rate. More than a million tonnes is set to
be added to China’s soda ash output by the end of
this year, with additional supply expected to come, for
instance, from China Salt Kunshan Co. Ltd and Qinghai Salt Lake
Magnesium Co. Ltd, which are each scheduled to commission new
production lines of 600,000 tpa.
The recovery of the ammonium chloride market, helped by a
relaxation in Chinese export policies for the material and the
introduction of a 5% flat export tax replacing a seasonally
variable rate, has also boosted soda ash output.
"Ammonium chloride prices have been very weak for a number of
years," Morrin said. "Recently, though, prices have improved,
which has given a boost to the Hou-based producers –
this is also supporting the strong exports that we have seen
In the Hou combined-soda process, the output ratio of soda ash
to ammonium chloride is 1:1 and the rising price of ammonium
chloride has pushed previously loss-making producers of soda
ash into profit. According to China Customs data, in H1 2015,
China exported 576,056 tonnes ammonium chloride, up 189.3%
It is hoped that, by increasing exports, Chinese soda ash
producers can ease some of the pressure on their mounting
inventories, with estimates placing the country’s
present overproduction at somewhere between 5m and 10m tpa.
In its "2014 Chemical Soda Ash Analysis" report, IHS forecast
that global soda ash demand will increase by 34% from 55m tpa
in 2014 to 73m tpa in 2023, which may absorb some of
China’s additional capacity.
However, Chinese market observers have suggested that the rate
of increase in consumption is not expected to keep pace with
China’s production, and with large new projects
set to come on stream in Turkey by 2018 and US output showing
no signs of slowing down, there is likely to be competition for
ANSAC did not respond to requests for comment when contacted
by IM, but the
corporation has been vocal in its support for US trade policies
that aim to protect and promote domestic soda ash
In May this year, ANSAC applauded a US Senate vote to begin
debating the Bipartisan Congressional Trade Priorities and
Accountability Act 2015, also known at the trade promotion
authority (TPA), which aims to set priorities for US trade
negotiators and allow free trade agreements to be brought to
Congress without amendment.
"Allowing Congress to assert its authority over ongoing trade
negotiations paves the way for future passage of new free trade
agreements," said Christopher Douville, ANSAC’s
president, following the vote on 14 May. "Such agreements are
vital for the elimination of foreign market access barriers for
soda ash and the continued growth of US soda ash exports," he
Other recent policies have included The American Soda Ash
Competitiveness Act, introduced by California congressman,
Paul Cook, in April, which would reduce government royalties on
soda ash from 4% to 2%, fixed for the next five years.
Cook said that China was becoming an ever more dominant soda
ash presence, thanks to its "heavily subsidised" domestic
industry – referring to the credit Chinese
manufacturers receive for ammonium chloride production
– and that the US needs find ways to maintain market
"While American soda ash is found naturally, Chinese soda ash
is produced synthetically. Chinese synthetic production uses
twice the energy which results in over three times the carbon
emissions as natural soda ash production," a US Government
press release on the matter said.
In a statement on his personal website, Cook said that
protecting the US soda ash industry was a matter of national
security. "This is an important bill that will protect a vital
industry, grow jobs, and do this with little impact to the
federal budget. [Soda ash] production is a $1.8bn industry
within the US, providing over 3,000 direct jobs," he
India has also raised concerns about the threat of Chinese
exports to its domestic soda ash industry, which is likewise
based on synthetic production, and currently benefits from an
anti-dumping duty (ADD) on imports, although this is set to
expire in 2017.
India produced 2.375m tonnes soda ash in 2013-2014, according
to official estimates, and local manufacturers have plans to
increase this to 4m tpa before the ADD is lifted. Industry
leaders have also indicated their intention to approach the
government and request an extension to the tariff, in a bid to
protect to the domestic market. On 21 July the All India Glass
Manufacturers Federation (AIGMF) initiated an anti-dumping
review to determine whether the ADD should remain in place,
giving relevant parties 40 days to respond.
This decline in demand has also been reflected in prices for
Chinese soda ash. China’s export prices for dense
and light soda ash weakened in July as Chinese producers cut
offers by around $5/tonne in an effort to stimulate demand.
Industry participants have diverged in their outlook for prices
for the remainder of this year. US-based suppliers have
suggested that there is still some margin for growth, but
others have warned that the rise in Chinese export capacity may
erode selling values sooner than predicted.