Lower-carbon natural production, coupled with the European
Union’s tax on carbon emissions, is pushing
synthetic production of soda ash toward a position where
capacity expansions are not currently viable. Marked by
environmental regulation, differing cost bases and key
producers restructuring their business models, the soda ash
production landscape is taking a new shape.
This trio of trends has led to pressure on the long-term
sustainability of synthetic soda ash production. Global demand
was around 58 million tonnes in 2020 – a 6.2% fall
from 61 million tonnes in 2019, according to industry
researcher IHS Markit.
This led to slightly lower prices in Europe so far this
year. Fastmarkets’ price assessment for soda ash
natural and synthetic, dense and light, large contracts,
delivered Europe was €165-210 per tonne ($198-252 per
tonne) as of April 29. This is down from €175-220 per
tonne in November 2020.
With production in China at 23 million tonnes per year, the
United States putting out 14 million tpy and around 5 million
tpy coming from Turkey – much of the remaining 18
million tpy is produced in Europe. Russia and Botswana also
have sites, while India is home to several synthetic
Any pressure that jeopardizes European synthetic soda
production would be significant for the global market, notably
for glass which cannot substitute for ash – since
glass has been identified as a key market for the post-pandemic
Regulation pinches on profits
The EU’s Emissions Trading Scheme (ETS) is a real
threat to the profitability of synthetic soda ash production in
the region, market sources have said. "CO2 prices are going
higher and I just can’t see how that is going to
be viable in the future. Synthetic plants may have to focus on
producing sodium bicarbonate – which commands a
premium on price," one distributor said.
The ETS allows industrial companies in Europe to be given a
number of credits, or an allowance, for the amount of emissions
they can produce each year. For anything they produce above
that quota, companies must purchase additional credits. This
financially incentivizes the business to invest in order to
emit less CO2 and have to purchase fewer credits, preserving
One synthetic producer said this cost is "multi-millions of
dollars annually". Given that, most plants in Europe that
produce synthetically produce less than 1 million tpy, whereas
the two natural plants in Turkey have a nameplate capacity of
2.7 million tpy and 1.8 million tpy.
The six natural plants in the US have a total nameplate
capacity of 13.9 million tpy, according the US Geological
Survey. That averages 2.31 million tpy per plant.
This pattern of production creates smaller economies of
scale for the synthetic producers with regards to energy
consumption. More significantly, the natural producers do not
have to buy credits because they are situated in Turkey, China
or the US – outside of the EU’s remit.
Synthetic producers burn coal as part of the production
process, while natural producers use solution mining.
ETS credits were at an all-time high at €44.33 per
tonne of CO2 on April 16, according to climate thinktank Ember
Climate – whose data spans back to 2008. The ETS
system works by issuing an annually decreasing number of
credits to emission-producing companies with the aim that this
will force industries to emit less CO2.
This places a greater value on the remaining credits by
tightening the supply, so the price pressure on these credits
could well increase. It also potentially increases the demand
for them, should companies fail to reduce emissions as the
quota is reduced – resulting in more companies that
are over the limit, fighting over fewer credits.
There are phases of the ETS and the turn of 2021 marked the
start of the fourth phase, which will run through to 2030. This
means the total allowance for the volume of carbon emissions
was reduced at the start of this year. Overall emissions
allowances will decrease by 2.2% each year during this 10-year
stretch – compared with 1.74% during phase three.
The new phase has squeezed supply, which explains the spike
in the credit cost to the all-time high, a second producer
Several synthetic plants across Europe have already been
retrofitted with environmentally friendly energy sources. Tata
Chemicals’ plant in the United Kingdom has been
fitted with a system which consumes natural gas and allows the
producer to sell energy back to the national grid.
The India-headquartered multinational is in the process of
building a carbon capture unit at the UK plant, which will
capture emissions from the company’s power and
steam generating units and take the CO2 and return it to the
manufacturing process. This will cut CO2 emissions by 40,000
tonnes (11%) each year.
Belgian chemicals company Solvay has been particularly
active in this area – investing in low-carbon energy
sources for plants in Spain, Bulgaria, Germany and France,
which, upon completion in 2024, will result in 469,000 fewer
tonnes of CO2 emissions annually. At current ETS prices this
would save about €20.8 million per year.
These efficiencies add to an energy-efficient gas turbine
installation at the Rosignano, Italy plant in 2018. At the
time, Solvay did not comment on the level of emissions that
would save annually.
The problem for synthetic soda ash production is that once
energy sources have been switched over, there will be a point
at which emissions cannot easily be reduced any further. The
last option then would be to develop the widely used Solvay
process itself – the preferred process for synthetic
soda production in Europe – in such a way as to be
less emission intensive. But this would require adapting the
long-established chemical process.
This ETS cost facing synthetic producers has strengthened a
pre-existing competitive advantage for natural soda ash
producers, who typically have a lower cost base. The large
number of recent soda ash capacity expansions has primarily
come from the natural side of the market – with
natural production typically having a lower cost base of
production, which existed when the ETS credits sat at
significantly lower numbers than they do today. There is
currently no scheme to charge companies for CO2 emissions in
Solution mining trona ore is significantly less energy
intensive, although this is offset to an extent by the remote
locations where trona is found – Inner Mongolia,
inland Turkey and Wyoming, US. These locations often require
expensive inland logistics to move this bulk commodity long
distances to seaports for it to then be shipped. Synthetic
plants can be built nearer customers.
While production expands upstream, the same companies are
developing footprints further down the supply chain.
The world’s largest dense-grade producer, Ciner
Group, has announced that it is planning to build a glass
packaging factory in Wales. This sparks interest because Ciner
is also expanding soda ash production – having
announced 4 million tonnes of new capacity in the coming
Joint-ventures and vertical integration are not uncommon for
the market, many soda producers in India have downstream
textile manufacturing as part of the business model.
Flat glass producer AGC already has a joint venture in a
Wyoming production facility with Solvay.
Turkish soda producer Sisecam is also vertically integrated
with a flat-glass production. Sisecam also owns part of the
Devnya, Bulgaria site with Solvay, and has co-invested with
Ciner to expand Ciner’s Wyoming site.
At the time of the Ciner co-investment announcement, in June
2019, Sisecem’s chief executive officer, Ahmet
Kirman, said Sisecem was aiming to increase its position and
become part of the world’s top three soda ash
Some soda ash producers are still looking to grow their
footprint in the production market, although it could be seen
as an industry trend that perhaps this is only possible with
downstream integration or similar. In other words, moves
already made by others could be seen as a signal that vertical
integration is required to support growth in soda ash
By contrast, moving the other way, container glass
manufacturer O-I sold its 25% stake in a Wyoming soda facility
to Tata Chemicals, leaving the soda ash producer the sole owner
of that plant from December 2019.
While the human population grows and the uptake of glass
products in developing countries ramps up, there will almost
undoubtedly be more demand for glass. The post-pandemic
economic recovery, widely dubbed the green recovery, will
create further demand for glass. Solar panels will be a growth
area for the material and was labelled as "immune" to the
pandemic by IHS. This trend will bolster the outlook for the
soda ash market.
Solvay’s recent move
One of the biggest and most recent moves in the soda ash
industry has been Solvay’s "carve out" of its soda
ash business unit.
Under the technical carve out, Solvay is taking steps to
organize the soda ash and derivatives business unit into a
separate and fully controlled legal entity.
The move has widely been seen by the market as a potential
first step by Solvay towards selling off its soda ash business
unit. This move is interesting because it also follows the
investments undertaken by Solvay to reduce emissions across
several of its soda ash production facilities.
The company also earlier announced investment in
debottlenecking activities to achieve another 500,000 tpy
across multiple production facilities – a two-year
exercise announced in February 2019.
Solvay told Fastmarkets that all the investment decisions
were modelled on a price of €50 per tonne for the ETS
credit scheme since the first quarter of 2019. This is relevant
given that ETS prices are now reaching an all-time high and
closing towards that price level.
No decision had been made yet regarding the future of the
soda ash business unit beyond the initial carve out, and all
options were open, Solvay chief executive Ilham Kadri said
during a full-year results call in February when the "carve
out" was announced.
Given its importance in the international soda ash business,
market participants will be watching Solvay’s
future strategy and that of the carved out business unit with
2030 onward for synthetic
The ETS system will mean that producers focus production
expansions on the natural side of the market for the coming
years. "Until 2030, expansions are focused on the natural
production sites," a second soda ash producer said.
Ciner’s natural soda expansions continue
despite the Covid-19-related headwinds on demand, as do Genesis
Alkali’s and Solvay’s.
"There is enough trona [natural ore] in Wyoming for one or
two centuries. Which is low CO2 content, less energy intensive
to produce although Wyoming is remote and there are logistics
costs to the coast," the second producer source said. "There is
no charge for emissions in the US. Although, I cannot bet that
it will stay this way. I am very confident that synthetic soda
ash can meet sustainability challenge and decrease CO2 and be
suitable for capacity investment from 2030 and onwards," he