Soda ash faces new market forces

By Laura Syrett
Published: Tuesday, 12 May 2020

As the global soda ash industry adjusts to shifts in market fundamentals, Laura Syrett considers the outlook for the mineral’s key sectors and emerging applications.

Soda ash (sodium carbonate, or Na₂CO₃) continues to be one of the world’s most widely-used inorganic chemicals. It is used in glass-making, soap and detergent production, flue-gas de-sulfurization, textiles, chemical processing and food, and more recently in lithium carbonate production and the recycling of lead-acid batteries.

Soda ash end-use markets in 2019

Prior to the outbreak of the Covid-19 pandemic, which has seen vast swathes of industry shuttered across the world for several weeks, demand for the mineral had been broadly flat year on year, according both to major producers’ results statements and the US Geological Survey (USGS). But the potential for demand growth, particularly in container glass, detergents and emerging applications, has prompted many producers to expand their capacity.

While capacity growth has exceeded consumption in the past five years, limiting price appreciation for soda ash, suppliers remained confident that downstream markets would swell to meet the increased output.

Global soda ash production, including China, was around 60 million tonnes in 2019, up from around 57 million tonnes in 2018, according to trade data and figures compiled by the USGS.

Before the Covid-19 pandemic took hold, Solvay, the world’s biggest producer of soda ash, cited forecasts indicating that the figure for annual global soda ash demand would grow by 10 million tonnes (excluding China) between 2018 and 2030, with 4 million tonnes of that extra annual demand materializing between 2019 and 2023.

Production capacity was being expanded around the world, particularly in Europe, Asia and North America, but led by Turkey and the United States, where producers have access to large deposits of the raw material trona, allowing them to produce low-cost natural soda ash for export.

Future demand was expected to be driven by export markets in emerging economies such as those in South-East Asia, South America, the Middle East and Africa, for the manufacturing of detergents and glass. South American soda ash demand was also being driven by the extraction of lithium for battery applications.

But in the first quarter of 2020, before the outbreak of Covid-19, soda ash prices from the US and Europe softened due to weaker demand in key export markets.

China has expanded its domestic production capacity for synthetic soda ash significantly in the past five years, to supply local glass and chemical industries.

But slowing economic growth and competition from cheap US and Turkish imports meant that China’s soda ash industry has struggled with oversupply, forcing it to export surplus production.

China accounted for around 41% of soda ash demand and 44% of global supply in 2019, meaning that it is technically self-sufficient in soda ash, but still exported around 1.3 million tonnes and imported roughly an equivalent volume from other sources, according to trade data.

Soda ash production capacity changes

US soda ash trade 2019

The main market for soda ash (specifically dense soda ash) is the glass industry, which in turn relies heavily on the construction and automotive markets (which consume flat glass) and consumer products (container glass).

Industry figures indicated that glass manufacturers consumed more than half of all the soda ash produced in 2019 (around 53%), with around 29% going into flat glass; 19% went into container glass; and other segments (such as fiber and specialty glasses) consumed 5%.

The construction industry was the biggest consumer of flat glass, followed by the automotive sector. Before the appearance of Covid-19, market research company GlobalData predicted an acceleration in the rate of growth in the global construction industry in 2020 to 3.1%, up from 2.6% from 2019.

Following the onset of the pandemic, however, the forecast for growth in 2020 was revised downward to 0.5%. This was expected to have a significant knock-on effect on demand for construction materials, including glass.

Prospects in the automotive market were even less optimistic. Car manufacturing and sales have slowed significantly in the US, Europe and China, following around a decade of steady growth leading up to 2019.

Data from the International Organization of Motor Vehicle Manufacturers showed that 91.8 million vehicles were produced worldwide in 2019, down by 5.2% from the year before. With the exception of longer-term expectations for a surge in production of autonomous and electric-power vehicles, further declines were expected. After Covid-19, the outlook was likely to be even more bleak.

In the container glass market, moves to reduce plastic consumption because of environmental and potential toxicity concerns were likely to benefit container-glass producers. On top of this, a surge in demand for beer, wine and spirits has increased consumption of glass bottles.

Container-glass production was not yet growing fast enough to cause any tightness in the soda ash market, however. In North America, it was actually declining and many domestic float glass plants have closed in the past 10 years. A handful of new plants and expansions were planned for the next two years, but the additional capacity would account for a fraction of the volume that North America has lost to emerging economies.

The US imports glass containers from cheaper producers in Mexico and Asia, meaning that much of the United States’ abundant soda ash supply is destined for offshore glassmakers. The USGS estimates that the US exported 6.9 million tonnes of soda ash in 2019, more than 58% of the 12 million tonnes the US produced in the year.

In Europe, although new glass manufacturing lines were put into operation in central and Eastern Europe in 2019, and more were due in Russia this year, soda ash supply was said to be more than sufficient to service these operations.

Longer-term, it was predicted that global container glass production from raw materials could increase significantly. But this partly depends on glass recycling levels, which are currently around 35% in the US and 78% in Europe.

Soda ash consumption in the glass industry in 2019 (about 32 million tonnes)

The chemicals industry consumes between 15% and 20% of annual soda ash production. Soda ash is used as a raw material in the production of sodium bicarbonates, phosphates, sodium silicates, chrome chemicals, photographic chemicals, chemical fertilizers, bentonites (which are an essential component for manufacturing coatings), food preservatives, carbonated drinks and personal care products.

In the oil and gas industry, soda ash is used to adjust the acidity level of drilling fluids. Although soda ash consumption in the chemicals market was relatively stable, volatility in the oil market was a heightened concern for some soda ash suppliers.
Petrochemical and oil markets face severe disruption from US sanctions on international trade with Iran, in addition to collapsing prices as a result of a production dispute between the Opec group and Russia, and plummeting demand due to the effects of Covid-19 lockdowns.

In the longer term, the advance of the chemical industry in developing countries was expected to support soda ash demand, but its effect on the environment (in terms of water consumption and waste), and competition from alternatives such as sodium silicate and caustic soda, may restrain market growth in the coming years.

Soaps, detergents
Another major driver of demand for soda ash, and specifically light soda ash, in the past 10 years has been detergent and soap consumption in developing economies. Overall, soap and detergents made up around 12% of global soda ash consumption in 2019.

While consumers in developed economies have generally shifted to liquid detergents, which do not use soda ash, cheaper and more readily available powder detergents were still primarily used in Africa, Asia and South America, and demand was increasing in step with rises in living standards.

According to estimates by US soda ash producer Genesis Alkali, average soda ash consumption in the US was 17 lb (7.7kg) per household per year, while in developing economies that figure was just 5 lb (2.3kg), suggesting that there was considerable room for consumption to grow.

Lithium, lead batteries
Growing demand for lithium from the global battery industry was a relatively small but nonetheless important and growing market for soda ash, which is one of the principal raw materials used in the production of lithium carbonate. Soda ash is added to purified lithium brine to aid the precipitation of carbonate.

Much of the world’s lithium carbonate is produced on the Andean salars of Chile and Argentina, so while lithium’s overall effect on global soda ash demand appeared relatively modest, it has had a transformative effect on South America’s soda ash supply chain.

According to industry sources, soda ash demand in South America has grown at an average annual rate of around 13% since 2013 and was expected to grow at an average rate of 19.3% over the next five years, if lithium carbonate demand continues to grow at the same rate as before the Covid-19 pandemic.

Adding soda ash into smelters used to recycle lead-acid batteries to aid recovery of metallic lead is a process that has been researched for the past three decades with the potential to create a significant new market for soda ash in the future.

The outbreak of Covid-19 across the world has had significant consequences for many industries, including soda ash.

In China, which has been increasing its domestic synthetic soda ash capacity significantly over the past five years, the China Soda Industry Association ordered all producers to reduce production by 30% in January to help stabilize the market in the wake of the country’s Covid-19 lockdown. This restriction was lifted in mid-April, but with companies asked to voluntarily limit production in response to market demand for the foreseeable future.

In South Africa, Tata Chemicals declared force majeure on shipments of soda ash to the country in early April, after government restrictions resulted in the closure of several berths in Durban, Tata’s main port of entry for soda ash. In India, Tata has said that its soda ash plants were working at lower capacity but that its global facilities were up and running.

Soda ash producer Ciech Soda Romania, part of Polish group Ciech, announced at the end of March that it was "forced" to enter into "a prolonged standby" in the context of the economic uncertainties caused by the Covid-19 pandemic, and after unsuccessful negotiations for the resumption of industrial steam supply to the factory.

These production restrictions could help support the soda ash supply-demand balance and mitigate declines in prices, depending on how end-markets responded to the lockdowns.

While the Covid-19 lockdowns were likely to have an ultimately negative effect on some end markets, particularly flat glass demand, they may positively affect others, such as container glass and food, due to the sustained high consumption of store-bought food and beverage products during the pandemic, as well as higher demand for pharmaceuticals.