UNDERSUPPLIED: Soda ash demand outstripping output

By Michael Greenfield
Published: Thursday, 17 May 2018

It’s a finite balance between supply just meeting demand and moving to an undersupplied market. Demand in the primary end-use market for soda ash - glass - is strong and there is no new soda ash capacity scheduled to come online to meet growing demand, which means the market could be faced with higher prices for the raw material, Michael Greenfield, Industrial Minerals reporter, has found.

Soda1  
A worker at Ciner Group’s Eti Soda plant prepares soda ash for shipping.
Eti Soda/Ciner Group 

The soda ash market showing tightness due to strong growth in end markets. Global demand is growing between 1-3% annually and as much 10-12% per year in the India market, while there is decreasing amounts of Chinese soda ash available for export.

If market tightness continues, without any relief in the form of additional capacity, this will raise concerns in the entire market.

China takes on new supply 

"We have seen a lot of tightness, American Natural Soda Ash Corporation [ANSAC] continues to be sold out. We are getting requests from every region for more product," Rob Fennell, global market and business development manager at US export body ANSAC told Industrial Minerals.

ANSAC operates as the international marketing arm for Ciner Resources, Tata Chemicals and Genesis Alkali, which between Solvay and Searles Valley Minerals - which also produce soda ash in the US, but both handle its own marketing - produced 11.8 million tonnes of soda ash in 2016, of which 6.78 million tonnes was exported from the United States. 

Even with Ciner Group’s fifth line of production at its new plant in Kazan, Turkey, coming fully online this year, the market is still expected to remain tight through 2019-20, Fennell told Industrial Minerals.

The soda ash market has consumed the additional capacity from Kazan without any significant impact on price, despite strong expectations that prices would decrease as the new supply came online.

This was due to an unexpected 4% increase in demand from the Chinese market in 2017. Accounting for around 40-45% of global demand and comfortably outstripping the 2% growth in the global market, the increased demand from China cushioned the impact of the slightly staggered rise in supply.

Ciner remained firm that the new supply wouldn’t send soda ash prices tumbling, and the company turned out to be correct. 

Soda ash, synthetic, dense and light, FOB China, $/tonne 
Soda2  
Industrial Minerals’ soda ash prices were $220-250 for soda ash, synthetic,
dense and light, fob, China until December 14, 2017, and have now recovered
to $270-280 as assessed on April 26.
Source: Industrial Minerals

End markets 

Glass is - and will remain - the largest end market for soda ash in Europe, accounting for more than 50% of demand.

One soda ash producer who spoke to Industrial Minerals pointed to flat glass as a continued growth market.

This was contradicted by a Europe-based producer, who said; "the construction sector is showing signs of slowing, which could correspond with a slowdown in demand if that trend continues, while new car registrations have started to come off a little.

"We won’t see a change in the container glass demand, only in the flat glass sectors," the second producer source added. 

Flat glass is used in window panes and car windshields, while the construction sectors also require soda ash for glass wool insulation, although demand for the latter is relatively minimal by comparison.

The European container glass industry grew at 5.8% by volume through 2012-2016, according to the European Container Glass Association (FEVE).

Glass containers have become increasingly popular as plastic packaging and single-use plastics have been seen in an increasingly negative light by consumers.

Soda3  
Tata Chemicals owns the Magadi operation in Kenya, which
produces soda ash from natural trona. The facility was
mothballed in 2014 but brought back online in 2015.
iStock 

Recycling

There is also the potential for recycling to influence demand for raw materials, but since many European countries already have well-developed recycling systems that have been in place for many years market participants believe that any impact on demand for raw materials has already been absorbed by the industry.

Recycling in container glass reached 74% of total production in 2016, or 11.6 million tonnes of collected glass, as measured by FEVE. 

This was believed to have saved 12.5 million tonnes of raw materials in 2014, and with 200 kilograms of soda ash required for every tonne of glass that should have removed demand for 2.5 million tonnes of soda ash just in Europe.

By comparison, the recycling rate for flat glass is between 6-8%, according to Stephane Noel, environmental advisor of industry trade association Glass for Europe.

"The estimation is that recycling is having a 15% saving on raw material, possibly a little higher," he added.

The significantly lower level of recycling in flat glass opposed to container glass is partially because the quality of flat glass needs to be higher but also retrieving cullet (scrap glass) from demolished buildings requires specialist procedures and infrastructure.

Adding one tonne of cullet to a glass furnace can save 1.2 tonnes of raw materials, and save manufacturers around 2-3% on energy costs as the cullet acts as a flux agent, according to figures from Glass for Europe.

The closed economy has more or less reached its equilibrium and should there be any significant uptake in recycling, it is likely to be incremental, and therefore unlikely to significantly impact the demand for soda ash.

Double glazing demand itself is strong too, growing at 5% from 2016-17 so increased recycling and sector growth would counterbalance each other if looking purely at demand for raw materials.

The situation, then, is that there is good demand in the sectors which traditionally require the raw material, with no additional supply coming onto the market.

This market status prompted a third producer supplying the European consumers with soda ash to assess the market as now going into undersupply, with them forecasting a $10/tonne increase on soda ash prices in the second half of 2018 and a $10/tonne increase in the first six months of 2019.

"The float and plate glass industry is short; the market is very good in Europe and everybody is looking for glass and therefore it is forcing soda ash demand [higher]," the third producer said.

Soda4  
Solvay produce natural soda ash at Green River, Wyoming.
Solvay 

US Market

The world’s largest natural producer, Ciner Group, which annually produces around 6.5 million tonnes of soda ash across the production sites in Turkey and US, has earmarked around 300,000 tonnes of additional tonnage to be brought to the market once the Kazan plant has been ramped up.

This capacity will be tapped through debottlenecking activities and optimisation of the machinery and plants at the facilities in Wyoming, US, however this will be staggered over the next three years.

Genesis Alkali could also expand its Granger plant by up to 700,000 tonnes. Although this would need some investment, according to ANSAC’s Fennell.

He was unable to comment on how large that investment would be or how quickly the product could reach the market. 

European producers are more modest about any similar exercises. A Europe-based producer speculated that there, "fundamentally would be scope for debottlenecking and potentially the big producers could find an additional 100,000-200,000 tonnes".

Drawing this back to the global market, if we take the upper valuations of the potential capacity that come to market after the Kazan ramp up, then its potentially 1 million tonnes. The global market is growing at 2% on average and therefore requires 1.2 million tonnes per year in additional capacity.

This puts the focus on the Chinese market as the only variable in terms of bringing back significant capacity to the market, or bringing online new capacity.

Soda ash exports from China stood at 1.52 million tonnes over 2017, which is down 23% from 1.97 million tonnes over 2016, according to China Customs data.

2016’s total was also down against the previous year, by 10% from 2.19 million tonnes exported during 2015.

This trend compounds issues in the global supply mix when coupled with the 4% growth in soda ash demand the Chinese market experienced over 2017, which could leave the soda ash market short in the coming years, unless significant capacity can hit the market in a fairly short time frame.

Soda5  
Searles Valley Minerals produces soda ash from the minerals
extracted at Searles Lake, California. It ships a million tonnes
a year of soda ash internationally.
Searles Valley Minerals 

Soda ash demand from the lithium market

Lithium producers use soda ash to produce lithium carbonate, requiring 1.5-2 metric tonnes of soda ash for every 1 tonne of lithium carbonate made. 

Growth in the lithium market, due to higher demand for lithium-ion batteries, is well documented. Global lithium carbonate equivalent production is estimated at 272,000 tonnes in 2018 while conservative estimates by Metal Bulletin Research show that demand will reach about 312,000 tonnes per year by 2019. 

So will this be a boon for soda ash demand?

Industrial Minerals understands demand for soda ash from lithium carbonate markets is anticipated to grow at 10-20% over the next few years. This does not, however, include production from lithium projects in Bolivia which reportedly has the largest reserves in the world, estimated at 9 billion tonnes.

In 2018, lithium carbonate production will account about 1% of global soda ash demand in 2018, according to ANSAC’s Fennell.

Increased demand from higher lithium carbonate production is likely to be counter-balanced by a decline in other end markets however.

 "We are seeing detergents drop off a bit, and this effectively counters the growth in demand from lithium carbonate. They are cancelling each other out in terms of influencing overall demand in the market," Fennell said.

Flat glass recycling in the Netherlands

Vlakglass Recycling Nederland (VRN) in the Netherlands operates as a not-for-profit and receives funding from Dutch domestic glass producers, along with some European producers with exposure to the Dutch flat glass market, in order to collect flat glass from demolished buildings.

VRN piloted its scheme in 2002 in the north of the Netherlands, and then subsequently proceeded to roll it out across the country.

Receiving €0.4 per square meter of double glazing "put into the Dutch market," VRN collects 72,000 tonnes of the total 105,000 tonnes of cullet in the Netherlands every year.

Part of the remainder is collected by other companies, and 15,000 tonnes goes to landfill.

Part of the organization’s mandate was to preserve the raw materials for glass, although it is unclear how significantly this impacts demand.

"We collect 70,000 tonnes and the yearly output of bottle glass is the Netherlands is 300,000 tonnes, so I think the impact [on soda ash] is fairly low," Cor Wittekoek, director of VRN, told Industrial Minerals.

Although the Netherlands doesn’t actually produce any float or flat glass, only double glazing, the aim of VRN is to have 20% of cullet going into flat glass furnaces and float glass lines with raw materials.