A new era for the salt supply chain

By IM Staff
Published: Thursday, 23 February 2017

Salt demand is closely linked to predictable factors such as population growth, but also to erratic phenomena like weather patterns, making the outlook for the industry hard to predict. David McNeill*, Senior Analyst at Roskill Information Services, assesses current trends in the global salt market.

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Salt has been used by humans for thousands of years and, in 2017, is set to be the most important non-energy mineral after iron ore, in terms of quantity. 

Salt is produced by the solar evaporation of seawater or inland brines, mining of rock salt and solution mining of brines. Solar salt typically accounts for around 40% of global production compared to 35% for brine and 25% rock salt, although these shares vary between years according to weather-led demand, as rock salt is preferred for road de-icing.

Salt’s main use is in the chemical sector, primarily in the production of chlor-alkali and synthetic soda ash. The other major end uses are de-icing and human consumption. These four major markets account for over 75% of salt demand, which varies between 300m and 330m tpa, depending on weather conditions in the Northern Hemisphere. The remainder is consumed in markets such as animal feedstuffs, water treatment and industrial applications.

The importance of the four major markets differs markedly between regions (see Figure 1). The Asian chlor-alkali and synthetic soda ash industries are the largest consumers using over 110m tpa of salt or around a third of the global total. Asian countries are also the largest regional consumers of salt in food. Road de-icing is usually the largest market in North America (20-40m tpa) and is also important in Europe (10-15m tpa).

Figure 1: World consumption of salt by region and market (%) 
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Source: Roskill 


Chlor-alkali and chemicals

Chlor-alkali production is the biggest market for salt worldwide, accounting for around 125m tpa. Regional consumption of salt in chlor-alkali is concentrated in Asia (70m tpa), North America (23m tpa) and Europe (22m tpa).

Chlor-alkali production involves the electrolysis of purified salt brine to produce chlorine (Cl2) and caustic soda (sodium hydroxide, NaOH) along with co-product hydrogen gas. On average, 1.75 tonnes salt is required to produce 1 tonne of chlorine, 1.12 tonnes sodium hydroxide and 2.8kg hydrogen.

Global chlorine capacity is just over 90m tpa, meaning it has the potential to consume 160m tpa of salt. Over half of all capacity (around 50m tpa) is located in East Asia, mostly China (>40m tpa). Significant amounts of capacity are also located in North America (>15m tpa) and Europe (10m tpa in the EU). Nearly 3m tpa of EU capacity is based on mercury technology which is due to be phased out by the end of 2017. Most of this will not be replaced on cost grounds and regional chlorine capacity could fall by as much as 1.5m tpa in 2018.

Around two thirds of chlorine is used in the production of organic chemicals and the balance in inorganics. The most important organic compound in terms of volume is ethylene dichloride (EDC), the prime chemical precursor to polyvinyl chloride (PVC). Caustic soda is a widely used alkali in many industries, including the aluminium and food sectors, textile production, soap and other cleaning agents, water treatment and effluent control.

Markets for chlorine and caustic soda are cyclic and levels of consumption rarely coincide. Chlorine consumption is the main driver of chlor-alkali production because it is toxic, cannot be easily transported and is expensive to store. Caustic soda can be transported and stored relatively easily but can be substituted for in many, though not all, applications. Substitution occurs when supply, set by chlorine consumption, is tight and prices are relatively high.

Rising demand for PVC and its precursors have been the main factors driving chlorine production in recent years. Global PVC capacity is over 45m tpa, of which some 24m tpa is located in China where the huge construction sector has provided the main stimulus. Remaining capacity is distributed equally between other Asian countries (primarily Japan, South Korea and Taiwan), Europe and North America. 

Caustic soda also has a wide range of end uses, including alumina production, pulp and paper manufacturing and chemical processing. Global consumption of caustic soda is over 70m tpa.

Synthetic soda ash capacity is around 48m tpa and is mostly located in China (28m tpa) and Western Europe (10.5m tpa). Production is based on variants of the ammonia-soda process, which uses salt-in-brine, limestone and ammonia as primary raw materials. 

The Solvay process is the most widely used method globally, but the Hou method is commonly used in China. Estimated global production of synthetic soda ash rose from 22.7m tonnes in 2000 to almost 40m tonnes in 2015, representing an average annual growth rate of around 4%. On a regional basis, estimated production is concentrated in Asia, mostly China. 

Operations in Western Europe, the CIS and Turkey account for most of the remainder. Synthetic soda ash competes with natural material, which is mainly produced in the US but also in Turkey, China and Africa. Natural, mined soda ash has a much lower production cost, but tends to be located long distances from consumers.

The glass industry is by far the most important market for soda ash, followed by sodium chemicals such as silicate and bicarbonate. Global glass production is estimated at over 185m tpa and is concentrated in Asia, followed by Europe and North America. 

Container glass accounts for around 40% of the total market, followed by flat glass at 37%, fibreglass at 7.5% and other glass at 15.5%. The largest national market for glass is in China where production has been stimulated by both rising domestic consumption and exports.

Consolidation is currently underway in the Chinese soda ash industry, where a number of small and medium sized producers have closed or been merged into larger companies. The main reason for this has been government efforts to curb overcapacity, caused by a slowdown in the domestic construction sector for the first time in decades. 

Housing construction is expected to start recovering in the near future and there remains a large backlog of housing projects yet to be completed. Most of the subsequent increase in demand for soda ash will be met by domestic synthetic producers as natural sources in China are located far from population centres and have high transport costs. 

A greater proportion of Chinese synthetic output is likely to come from the more salt-intensive Solvay process in the future, which should mean that demand for salt from the Chinese soda ash industry will rise at a higher rate than production.

In India, domestic synthetic producers will meet most of the anticipated increase in local demand as they are protected from competition to a significant degree by import tariffs. 

Consumption is expected to grow in North and Latin America, where most, if not all, demand will be met by natural material produced in the US. 

Consumption growth in Africa and the Middle East is expected to be largely be supplied by natural sources in Turkey and Kenya, in addition to traditional suppliers. 
In Europe, EU demand is forecast to show little growth and could even decline in some areas, such as the CIS.

De-icing

De-icing, the third-largest market for salt, tends to use 33-40m tpa on average but can exceed 50m tonnes in exceptional years. Rock salt is the main type of salt used for de-icing, accounting for over 95% of US and around 70% of EU consumption. 

North America is the largest market, followed by Europe and Asia. The amount of salt consumed in this application depends almost entirely on the severity of weather conditions during winter and can show very large variations from year to year and between regions. 

Since 2002, US consumption of salt in de-icing has ranged between 11m tpa and 23m tpa. European usage of de-icing salt is smaller than that of North America, as the continent’s winters are usually shorter and less severe. The main markets in Europe are Germany (3m tpa) and the UK (2m tpa), followed by Scandinavia (1m tpa). 

In Asia, an estimated 3m tpa is used in China, Japan and South Korea. Chinese investment in domestic infrastructure and rising use of road transport may lead to greater use of de-icing salt in Asia in the foreseeable future.

Food

The fourth major market for salt is in food and food processing. The size of regional markets is directly related to the size of populations, so the largest is in Asia, followed by Africa then Europe and North America (see Figure 2).

Figure 2: Estimated consumption of salt
in food/food processing by region (%) 
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Source: Roskill 

The global population is estimated to have increased from 2.53bn in 1950 to 7.35bn in 2015, growing at an average rate of around 1.7% per year. Most of this increase took place in Asia (>3bn), Africa (>1bn) and Latin America (>500m). 

Asia accounts for almost two-thirds of global salt consumption in food and food processing because of the size of its population (4.23bn in 2015) and relatively high per capita consumption (estimated at 12g/day). Within the region, the main markets are in China and India. 

In industrialised regions such as North America and Europe, some three-quarters of salt intake is from processed and prepared foods, with the remainder coming from table salt.

Demand growth
World demand for salt is forecast to rise by an average of 2% per year to almost 400m tonnes in 2025. Much of the increase will be in Asia (especially China and India), where it is expected to reach around 200m tpa. 

In North America, demand is forecast to reach 95m tpa and in Europe some 80m tpa.

Demand for salt in chlor-alkali is expected to grow by an average of nearly 3% per year from under 125m tpa to almost 160m tpa by 2025. Most of this will be in Asia, especially China, where demand is forecast to rise by over 25m tpa. Indian demand is also set to rise as chlor-alkali capacity grows to supply rising domestic demand.

Outside Asia, regional supplies of salt are expected to be sufficient to meet the rise in demand. North American consumption is slated to increase by over 3m tpa, partly because of an increase in PVC production for export markets. Demand in both Europe and the Middle East is expected to grow by over 1m tpa.

Demand for synthetic soda ash is forecast to reach 65m tpa in 2025, most of which will be in Asia, led by China and, to a lesser degree, India. 

Elsewhere, salt consumption in synthetic soda ash is forecast to remain largely flat and may decline slightly in some areas. An exception may be the Middle East where a number of potential synthetic soda ash projects and capacity expansions are located.

Global demand for de-icing salt will continue to continue to fluctuate between years, following weather patterns. 

Overall, global demand is forecast to be around 35-50m tpa in 2025. The effects of climate change on winter weather patterns are yet to be seen, but there are indications that the average severity of winter weather may be lessening. Some winters, however, may be much more severe than average, requiring higher amounts of salt. The expansion of road networks in northern latitudes will also increase use of salt in de-icing.

The world population is predicted to rise above 8bn by 2025, based on anticipated average expansion of around 1% per year. If per capita salt use remains similar to current levels, then food and food processing will account for around 33m tpa of consumption. 

However the use of salt in food may fall as concern grows about its potential adverse health effects. World Health Organization (WHO) member states have agreed on a voluntary reduction of 30% in mean population intake of salt, with the aim of achieving individual consumption of less than 5g per day by 2025. If global per capita use were to fall to WHO guidelines, then forecast salt demand would be less than half its current total.

Salt production

Salt is produced in over a hundred countries, but the highest volumes are produced in just a handful. In 2015, production in seven countries, each with output of more than 10m tonnes, collectively accounted for nearly 190m tonnes or around two-thirds of total supply (see Figure 3).

Figure 3: Production of salt by leading countries, 2006-2015 (m tonnes) 
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Source: Roskill 

In general, salt supplies are sufficient in most locations to meet current and future levels of demand. 

The high bulk/low value nature of salt means most is used close to the point of production, but over 65m tpa is traded internationally. Trade has increased in recent years, assisted by historically low dry bulk shipping costs. The main long distance exports are from low cost large-scale solar salt operations in Mexico and Australia to consumers in East Asia.

Large amounts of rock salt are also shipped from Chile, mostly to the North American de-icing market.

There is considerable trade within Western Europe where consumers can be closer to suppliers across national borders than within their own countries. The evolving pattern of international trade in salt is shown in Figure 4 and Figure 5, with the latter illustrating the significant growth in salt volumes from Indian producers to China.

Chinese chemical companies, especially in coastal areas, are importing increasing amounts of high quality solar salt, particularly from India. Indian exports to China have risen by over 40% over the last decade. A major reason for this is a shortage of high grade salt sources in China, in part because of the loss of land to construction that was previously used to make solar salt.

The Chinese edible salt industry has historically been subject to state control, but this changed at the start of 2017. China’s government now allows private companies to enter the edible salt market and existing producers to sell directly to consumers. 

Prior to this, the China National Salt Industry Corporation (CNSIC or China Salt) decided production limits and prices. CNSIC issued permits to around a hundred companies to produce salt and the state still retains supervision over retail pricing. 

The intentions of the reforms are to introduce competition within the domestic salt industry, improve productivity and reduce prices. This is also likely to lead to supply consolidation.

Figure 4: Major global trade flows of salt,
2006 (m tonnes) 
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Colour of the trade flow corresponds to the
exporting country/region
Source: Roskill and Global Trade Atlas 


Figure 5: Major global trade flows of salt,
2015 (m tonnes) 
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Colour of the trade flow corresponds to the
 exporting country/region
Source: Roskill and Global Trade Atlas 


New capacity

There are a number of salt projects around the world at various stages of planning and construction that could potentially add over 20m tpa to global capacity.

Indian producers, particularly in Gujarat, are increasing capacity to meet rising Chinese demand. Indian company Archean Group, for example, plans to add 3m tpa to its supply capability by 2017.

In Australia, Germany-based K+S Group, the world’s largest salt producer, plans to develop a 3.5m tpa capacity solar salt operation at Ashburton, Victoria, to supply the Asian market.

In Europe, Netherlands-headquartered AkzoNobel and Israeli-Spanish group ICL Iberia are opening a 1.5m tpa pure dried vacuum (PDV) plant in Spain this year and are considering doubling this capacity. 

UK-listed Sirius Minerals Plc is developing a potash mine in the UK, which may include 2m tpa of rock salt capacity to supply the de-icing market.

US-listed Compass Minerals Inc. is continuing to expand its Goderich rock salt mine in Ontario, Canada to supply the regional de-icing market.

In Mexico, Exportadora de Sal SA (ESSA) has indicated it may add 2m tpa to its capacity.

Salt prices

Salt prices vary from less than $10/tonne to nearly $200/tonne, depending on the method of extraction, country of origin, process used, grade and application.

Salt-in-brine products usually have the lowest price because mining and processing costs are minimal. Vacuum evaporated salt is generally the most expensive, reflecting the energy costs incurred in processing and the high purity of the product. 

In general, salt sold in bulk has a lower value than material that has been packaged, palletised or pressed into blocks.

De-icing salt tends to be the least expensive of solid salt grades. Food-grade salt commands higher prices than chemical-grade material, owing to the extra processing and packaging costs for food products.

Prices for pharmaceutical grade salt are more than seven times those of chemical grade material because of the high energy requirements of specialised vacuum processing technology used to produce it.

In Asia, prices of high-grade solar salt are expected to rise at above the rate of inflation because of the continuing shortage of this type of salt in China, although increasing competition between suppliers in India, Australia and China may slow the rate at which prices rise.

The deregulation of the edible salt market in China may also act to slow price appreciation.
In North America and Europe, prices will probably rise more slowly in line with lower rates of demand growth. The introduction of new suppliers in both regions should also undermine price growth as competition increases, especially in the chemical and de-icing markets.


*David has been analysing metal and industrial mineral markets for over two decades since joining Roskill in 1994. He has written many of the company’s multi-client reports but in more recent years has specialised in those dealing with industrial minerals. In particular, he has concentrated on those minerals used in the paper (calcium carbonate and kaolin), refractory (magnesia and zircon), chemical (salt, iodine and soda ash) and glass (boron) industries. David has also contributed to a wide range of consultancy projects, including due diligence reports on salt, magnesia and talc, and market studies on various aspects of the boron, talc and calcium carbonate markets.