Soda ash market to remain tight for years

By Alex Cook
Published: Tuesday, 17 May 2022

Global efforts to reduce carbon emissions are affecting the outlook for soda ash production in the years ahead.

Soda ash, natural and synthetic, dense and light, fob China, $/tonne  

The push to transform the globe into a zero-carbon economy will have significant effects on the soda ash outlook over the next 5-15 years. Steps taken by both the EU and China to curb the environmental effects of synthetic soda ash production have already affected production capacity in a period when the balance of supply and demand has become increasingly tight.

One such step has been the rise in government inspections across China, targeting a reduction in environmentally harmful waste and emissions from industrial units. Some production capacity has had to close as a result.

The temporary closure of the Lianyungang plant in Jiangsu province in China in October 2021 is one example. There are relocation plans for the plant within China, but no opening date has been set. This held a nameplate capacity of about 1.1 million tonnes per year, so suspending production made a sizeable reduction in China’s annual volume of soda ash output, which was estimated at 27 million tonnes in 2019 according to the United States Geological Survey. Global supply has tightened as a result.

China’s domestic market consumes large volumes of the country’s production and has left little available for exports. Continuing freight delays, expected to last into late 2022, have further restricted the movement of material.

The European Commission has broad legislation that has affected synthetic soda ash production on the continent. For example, the region’s Emissions Trading Scheme (ETS) requires credits to be purchased if emissions allowances are breached. ETS carbon permits hit a record high of €96.93 ($100.97) per tonne in February 2022, a marked increase from €38.61 per tonne just 12 months earlier, although their price has eased since February.

"The rapid run-up in the price of these carbon permits in the past 12 months has hit our operations hard. Long-term contract pricing has had to increase," one European producer said.

The ETS system incentivizes investment in carbon-dioxide-reducing technology by decreasing the number of permits available each year. This system has the goal that, by 2030, ETS sectors must have reduced emissions by 43% compared with 2005 levels.

Producers in Europe have already taken measures to cut synthetic soda ash production emissions. Belgium-based chemicals producer Solvay, for example, announced plans with French waste management company Veolia in February 2022 to use refuse-derived fuel (RDF) as an energy source at its plant in France. The intention is to reduce carbon dioxide emissions at the plant by 50%, an estimated 240,000 tonnes per year.

"To actively contribute to the emergence of a low-carbon society, we need to transform our plants to put in place sustainable and competitive alternative energies," Solvay chief executive officer Ilham Kadri said at the announcement.

Global production of soda ash, estimated at 56.8 million tonnes in 2019, is unevenly split across a small number of countries. China remains the largest producer. The United States is second, with 11.7 million tpy, and Turkey produces 3.5 million tpy. Much of the remaining output comes from Europe, Russia, India and parts of Africa.

US output is classed as 'natural production’ in being mined from trona or brine deposits, which are said to generate less environmental waste than synthetic production.

Annual demand growth looks likely to exacerbate supply tightness, but some new projects due to come onstream may ease the situation from next year onward.

The InoChem factory in Saudi Arabia will be the first soda ash production plant in the country, to be located in Ras Al-Khair. Production is estimated at 300,000 tpy and the plant is set to be operational in late 2022.

Turkey’s Yildirim Group plans to build Kazakhstan’s first soda ash production facility, in the Zhambyl region, with a rumored capacity for 1 million tpy. Phase one entails 500,000 tpy and is planned for completion in 2024. This will cover Kazakhstan’s domestic consumption, freeing an estimated 350,000 tpy of soda ash imports into the country.

Genesis Energy LP plans to complete the expansion of its Granger project in the US by the third quarter of 2023, according to its third-quarter 2021 earnings report. The facility’s production is expected to ramp up to 1.3 million tpy in the subsequent 9-12 months.

The US soda ash industry’s production capacity will grow further with a planned $4-billion investment by Sisecam and Ciner Group. The strategic investment will quadruple Sisecam-controlled soda ash production capacity to 10 milllon tpy via a planned 5-million-tpy facility scheduled to begin production in 2025, and to reach full capacity in 2027.