The global soda ash industry
is going through a painful adjustment to challenging sector
dynamics, characterised by regional supply-demand imbalances,
price volatility and rising competition.
According to Marguerite Morrin, senior
director for chlor-alkali and soda ash at chemicals consultancy
IHS, like many raw materials, the soda ash industry is facing a
"new normal" – although she questioned assumptions of
what constitutes "normality" in a sector so sensitive to
fluctuations in economic conditions.
Speaking at the IHS World Soda Ash
Outlook in Barcelona, Spain, Morrin said that the industry
had been resting on expectations that were no longer supported
by market realities, largely because of the disruptive
influence of China and the impact of the global economic
recession in 2008-2009.
Normality for the soda ash industry, she
said, was when soda ash demand was growing at a rate 2.4% per
annum, led by demand for container glass and fuelled by oil
prices in the range of $20-25/barrel (bbl).
Rapid economic growth in China turned
these market features upside down, however, pushing up demand
growth for soda ash to 4% per annum with the flat glass market
accounting for the bulk of consumption. Oil prices averaged
around $99/bbl between 2008 and mid-2014, meanwhile, increasing
production costs, although the oil price has since collapsed to
half this level.
In Europe, falling demand particularly
from the CIS region has left the continent in a situation of
oversupply, despite significant cuts to soda ash production
In the CIS, Russia saw demand slip
by 2.4% in 2014, forcing local plant operating rates down to
just 70% of capacity, while the market in Kazakhstan slumped by
18% last year and is likely to remain weak, Morrin said.
In Ukraine, which historically had three
soda ash plants, one closed in 1998 and another shut its doors
in 2009, triggered by the global recession.
Russia’s annexation of Crimea last year
contributed to severe disruption to transport routes used by
Crimea-based CrimSoda and Group DF. The country is believed to
have removed import duties on soda ash, although this has not
been confirmed by IHS.
The consultancy assesses soda ash prices
in Ukraine to be around $300-400/tonne on a CFR basis
– significantly higher than averages of $225-250/tonne
for Western European delivered values.
On a volume basis, Western Europe is
leading the decline, with weaker glass and chemicals markets
leading to a demand drop of 900,000 tpa soda ash on
pre-recession levels. This is followed by the CIS, where demand
has fallen by 450,000 tonnes since 2008 and finally Central
Europe, which as seen consumption contract by a relatively
modest 30,000 tonnes on the same comparison.
Collectively, this means European demand
is down by 1.4m tpa although capacity has fallen even more
steeply, by 1.9m tpa, from the market peak prior to the 2008
Although European Union glass demand has
recovered to some extent since then, production levels of 3.7m
tonnes are still 10% lower than they were in 2007.
Overall European demand for soda ash,
covering consumption in Western and Eastern Europe and the CIS,
will reach 10.7m tonnes this year, IHS calculates, while
capacity is expected to total 13.5m tonnes.
Middle East and
Soda ash capacity in the Middle East,
including Turkey, will exceed regional consumption by around
400,000 tpa this year, Morrin said, with demand set to reach
about 2.5m tonnes against 2.9m tonnes of output.
Morrin explained that for Africa, a
relatively immature market for soda ash, there is "no normal"
for statistical comparison. Consumption rates range from around
0.6kg per capita in Nigeria to 3.2kg per capita in Egypt
– where 130,000 tpa of domestic production looks
likely to face stiff competition from an additional 3m tpa soda
ash capacity in Turkey in the next three years – to
7.1kg per capita in South Africa.
Other producing countries in Africa,
Botswana and Kenya, which supply some local demand but also
send substantial volumes to export markets, are also facing
tougher market conditions.
Some growth could come from an increase in
domestic metals refining in Africa, although potential
expansions, such as increased uranium mining in Namibia, have
so far failed to materialise.
Excluding China, Morrin said that Asia
remains a "sizeable market" for soda ash. She characterised the
region as a combination of developed and developing countries,
many of which are exclusively dependent on imports, which have
seen supply affected by recent capacity closures in Japan and
Australia – only partially offset by the opening of a
new soda ash plant in Vietnam.
The Indian market for soda ash has
arguably the greatest potential to expand in the near term,
Morrin said, highlighting the country’s relatively
robust economy, its gap in housing and its rapidly escalating
wine and automotive industries – all of which are
expected to support rising glass demand.
Indian soda ash consumption currently
stands at around 2-2.5kg per capita, compared to 28kg per
capita in the US, illustrating the room for growth. IHS
estimates that Indian soda ash demand in 2015 will be 3.4m
tonnes, compared to 3.1m tonnes domestic capacity.
Despite its reliance on imports to make up
the shortfall, the country has imposed import duties ranging
between $2.38/tonne and $38.79/tonne in an effort to protect
its domestic soda ash industry.
US and South America
Despite high local consumption rates, the
majority, or 56%, of US soda ash production
is sold to export markets and shipment volumes have increased
by 7% since 2010, Morrin said.
Here, domestic demand is still 800,000
tonnes below pre-recession levels – unlike in Western
Europe, where container glass production is almost back to
pre-recession levels, in the US, this sector has seen declining
trends year-on-year. Morrin noted that there are some positive
trends in container glass, such as the craft beer sector, which
is seeing very positive growth in the last five years.
Morrin said that although 11 out of 47
float glass plants in the US shut between 2007 and 2014, flat
glass demand is now "booming" in the US as new housing starts
in the country hit an eight-year high in July.
South America is also a healthy market for
soda ash, with 2.6m tonnes demand estimated for this year but
just 250,000 tonnes local capacity. Mexico, in particular, has
been identified as a solid consumer, with 1.3m tonnes of annual
demand expected to grow by 3-4% to 2020.
A single synthetic soda ash plant in
Mexico, operated by Industrial del Alkali, produces 285,000 tpa
soda ash but almost all (99.9%) of its remaining 1m tpa
consumption is imported from the US by rail.
Morrin said that the soda ash industry
would not return to what might have been considered normality,
or at least stability, for the foreseeable future, although
demand growth is expected to settle at around 2.5% per
This growth will not be led by flat glass
demand however, as it was in the past, owing to economic
deceleration in China.
She predicted that Turkey will be the "new
spider" in the global soda ash web, with locally-based Ciner
Group due to add a further 3m tpa soda ash capacity to the
market by 2018 with new natural soda ash plants at Beypazari
and Kazan already under construction and, in addition, its
acquisition of a 38% shareholding in US-based OCI Wyoming
This will make Ciner the second largest
soda ash producer in the world (at 4.478m tpa), after
Belgium’s Solvay SA (which is expected to have a
nameplate capacity to produce 7.45m tpa soda ash in 2018), and
"could create chaos" in the market in the short term.
"When new capacity comes on stream,
operating rates will come under pressure," Morrin warned,
adding that "the closer you are to that new capacity, the
harder it will be."
predicts significant shifts in the global demand profile
for soda ash (source: IHS).