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.