Glass production in emerging economies to drive soda ash demand
Soda Ash: Market Outlook to 2015 (10th edition, 2010)
Global consumption of soda ash fell by 7.6% in 2009 to 44Mt, following growth of 4.2%py between 2000 and 2008. Consumers in the glass industry, which accounts for 53% of total demand, scaled back purchases during the global economic downturn. The fall was compounded by lower detergent and chemical output, the other major end-uses for soda ash.
Emerging economies have been the growth driver for soda ash over the last decade with rising GDP and urbanisation leading to higher per capita use of products manufactured using soda ash. China was one of only a handful of countries showing a positive increase in soda ash consumption in 2009 and was responsible for 90% of world growth between 2000 and 2009. In industrialised economies, however, demand for soda ash has been flat due to the maturity of products using soda ash in the market, as well as substitution and competition pressures.
Future demand for soda ash, forecast to grow at 3%py over the next five years, will be led by flat glass, detergents and water treatment. The use of soda ash in mining and metals and flue gas desulphurisation might also spur increased demand. Emerging economies, particularly China and the wider Southeast Asia region, but also the Middle East, South Asia and South America, will continue to provide the best opportunities for soda ash demand growth on a regional basis. The outlook for developed economies is more uncertain.
Rationalisation looms over soda ash producers
Production of soda ash is highly concentrated in China, the USA and Europe, together accounted for 80% of total production in 2009. A period of acquisitions in the mid- to late- 2000s has consolidated ownership of capacity. Tata Chemicals and Nirma of India now have operations in more than one region, and operate both natural and synthetic capacity. Chinese companies have expanded synthetic capacity rapidly and some are now of a size comparable with natural producers in the USA. New capacity has also been opened in other countries, most recently in Turkey in 2009.
Total capacity for soda ash production stands at 63Mtpy in mid-2010. Operating rates are recovering from lows of 70% in 2009, but are still some way off reaching the 85% seen in 2007/08. New and expansion projects have the potential to add 15Mtpy to total capacity by 2015, with China contributing a significant proportion to this total and other emerging economies the remainder. China appears to be rapidly heading towards a position of substantial overcapacity, although tighter government targets for raw material and energy consumption could see some rationalisation of older capacity by 2015.
Can the USA win back deep-sea market share from China?
China and the USA compete for sales in the deep-sea export markets of East/Southeast Asia and South America, which lack sufficient domestic soda ash capacity. Elsewhere, soda ash rarely moves beyond the region in which it is produced, due to its low cost and high bulk characteristics. China is one of only a few countries that has been able to compete with lower-cost natural soda ash exported from the USA, primarily as costs at synthetic plants were below the norm in other regions, but also due its control of global shipping.
Input costs for synthetic soda ash plants are very unlikely to fall back to early-2000s levels, and will in all probability increase; the lower-cost of natural soda ash production could therefore present an opportunity for producers in the USA, Kenya and Turkey to restore and/or increase market share in deep-sea markets, which continue to grow. Exports of lower-cost soda ash from Turkey are likely to put pressure on higher-cost synthetic producers in Europe, with some capacity rationalisation expected in Europe in the near-term also.
Soda ash prices tracking energy costs
Energy prices rose significantly in late 2007/early 2008, increasing input costs at both natural and synthetic soda ash plants, the latter being notably more energy-intensive. Rising input costs caused prices of soda ash to increase across all regions between 2006 and 2008. The downturn in demand in 2009 prompted producers to drop prices accordingly, but in general these lagged the fall in the price of energy as most sales are made on long-term contracts.
Prices reached a floor in late 2009/early 2010 when new contracts were being negotiated, but are unlikely to fall further as energy costs remain high compared to the early-2000s. In the short-term, prices will continue to track energy costs and could be back at 2008 levels by 2015. Any upside in pricing will come from a return to high utilisation rates; however, capacity seems more than plentiful to meet demand in the period to 2015 and increased competition between suppliers could prevent significant price rises.
Soda Ash: Market Outlook to 2015 (11th edition, 2010)is available at £3500 / US$7000 / €5600 from Roskill Information Services Ltd, 27a Leopold Road, London SW19 7BB, England. Tel: +44 20 8944 0066. Fax +44 20 8947 9568 Email: [email protected] Web: www.roskill.com/soda-ash
Note to editors
The report contains 402 pages, 179 tables and 178 figures. It provides a detailed review of the industry, with subsections on the activities of the leading producing companies. It also analyses consumption, trade and prices.
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