Soda ash: Year in Review 2015

By IM Staff
Published: Monday, 21 December 2015

A roundup of the year's main events in the global soda ash industry.

Soda ash was one of the few good news stories in the industrial minerals industry in 2014, with rising prices and demand as growing economies produced more glass and chemicals, while mature markets were mostly back on their feet after the 2008-2009 global economic crisis. Shifting trade patterns and rising production have since offset capacity closures in some areas, however, and in 2015, the industry looked as though it could be heading for more oversupply.

SUPPLY SECURITY

Probably the most dynamic force in the global soda ash industry in 2015 was the increase in Chinese-produced soda ash on the international market. Although China scaled back its capacity expansion plans considerably from 2013-2014, production levels continued to rise, prompting the country’s producers to look for external markets to offload excess material.

According to consultancy IHS Chemical, China produced 25.28m tonnes soda ash in 2014, although total capacity in the country stood at around 32m tonnes and actual production was expected to be higher for 2015. Exports, which accounted for 7-8% of Chinese soda ash output in 2014, were also expected to show an increase.

Shipments to Asia increased sharply over the course of 2015, encroaching on the market share of the American National Soda Ash Corp. (ANSAC) – the marketing body in charge of exporting US-produced soda ash. In April, US congressman, Representative Paul Cook, proposed The American Soda Ash Competitiveness Act, which would reduce US government royalties on soda ash from 4% to 2% fixed for the next five years to make the industry more competitive with China. In September, a raft of US lobby groups and politicians offered public support for the bill, which had not been passed into law as of December 2015.

Elsewhere, India-based Tata Chemicals Group said in December 2014 that it intended to revive the mothballed 330,000 tpa Magadi soda ash plant in Kenya. The facility was successfully reopened in the first half of 2015, however, in July, the company announced the contaminated water supply was affecting the quality of its products.

In Turkey, Eti Soda, which is jointly owned by Ciner Group and Eti Mining Corp., told IM in May it was on track to develop its delayed, with infrastructure having been installed at the site in January. The project is on course to achieve 1.5m tpa production in the second half of 2017, plus a further 1m tpa capacity in H1 2018.

Construction of Eti Soda’s Beypazari project began in October 2014, with startup targeted for early 2017 for an eventual total capacity of 1.5m tpa soda ash.

Recent capacity closures in the UK, Australia, Japan and Portugal have helped mitigate the supply imbalance in these areas, meanwhile.

MARKET DEMAND

In Europe, falling soda ash demand, particularly from the CIS region, left the continent in a situation of oversupply, despite significant cuts to production capacity. On a volume basis, figures from IHS show that Western Europe led the decline in 2014-2015, with weaker glass and chemicals markets forcing a demand drop of 900,000 tpa soda ash on pre-recession levels. This was followed by the CIS, where demand had fallen by 450,000 tonnes since 2008 and finally Central Europe, which saw consumption contract by a relatively modest 30,000 tonnes on the same comparison.

Soda ash capacity in the Middle East, including Turkey, was anticipated to exceed regional consumption by around 400,000 tpa in 2015, with demand set to reach about 2.5m tonnes against 2.9m tonnes of output.

Excluding China, Asia remains a sizeable market for soda ash, with many countries exclusively dependent on imports. The Indian market for soda ash has arguably the greatest potential to expand in the near term, owing to its fairly robust economy and domestic supply constraints.

In the US, domestic demand for soda ash in 2015 was still around 800,000 tonnes below pre-recession levels, according to IHS, thanks largely to its declining glass market. South America remains a healthy market for soda ash, meanwhile, with 2.6m tonnes of the material estimated to be consumed in 2015, in a region that has just 250,000 tonnes of local capacity.

In September, IHS said at its annual World Soda Ash Outlook conference that the growth rate for soda ash consumption in China is expected to be about 1.5% per annum for the next few years.

In December, the European Commission published a package for an EU Circular Economy, which includes recycling targets for glass packaging of 75% by 2030. A typical batch of clear glass containers may consist of 155kg soda ash, while flat glass batches require about 115kg soda ash per 450kg silica sand used. The increase in recycling in Europe and, later, elsewhere in the world, is expected to put pressure on soda ash demand in the long term.

PRICE TRENDS

Soda ash prices softened both domestically and on an FOB basis in China in the first half of 2015, at the same time as raw material costs declined. This corresponded with a fall in domestic demand for soda ash, prompting Chinese producers to increase exports. 

Prices remained on a faintly negative trend in H2 and, in the US, it emerged during the fourth quarter that 2016 contract prices for US soda ash were agreed at an average of $5/s.ton ($5.51/tonne) above 2015 prices. Industry reports, confirmed by IM, indicated that the increases were lower than some US suppliers had hoped for. In July, US chemicals producer Tronox Ltd increased its soda ash prices by $12/s.ton ($13.22/tonne), along with three other locally-based rivals.

MARKET OUTLOOK

IHS believes that the soda ash industry will 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 annum. This growth will not be led by flat glass demand however, as it was in the past, owing to economic deceleration in China.

Planned capacity increases from Ciner Group, whose slated 3m tpa additional output by 2018 will make it 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), could upset the industry’s supply balance in the short term.