Pressure Builds on Soda Ash Prices Amid Supply Shifts

July 29, 2014

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Potential price hikes on the raw material could have downstream impact on prices for glass, soap and detergents, and paper, despite U.S. soda ash consumption remaining flat at 5 million annual tonnes in the last few years. Globally, supply capacity is shifting.

Look for growing pressure on soda ash prices as major U.S. producers try to improve profit margins for the slow-growth, but important, industrial chemical used to make glass, detergents, water treatment products, and paper.

FMC Minerals, the largest global producer of natural soda ash, and the largest U.S. producer, will increase list and off-list soda ash prices by $15/short ton for all grades effective Aug. 1.  The industry list price FOB Green River, Wyoming, has been $275/ton since the end of 2012. The hike represents a slightly more than 5 percent price increase. The increase in transaction market pricing is estimated by My Purchasing Center at around 12 percent.

A realized price increase of even $12 to $13 per ton would produce an additional profit of $60 million for FMC, which will continue to assess an energy surcharge base cost of $7 per million British thermal unit (mmBTU). Increases will be rolled in as contracts expire.

“We remain optimistic that the soda ash pricing environment is improving, and we continue to be very supportive of ANSAC's efforts to pursue additional price gains in export markets,” said FMC CEO Pierre R. Brondeau. ANSAC operates as the export sales and distribution arm for FMC, Tata Chemicals, and OCI, exporting approximately 4 million metric tons of natural soda ash annually.

The highly competitive export market is the elephant in the room for the major soda ash producers.

China, using synthetic processes to make soda ash from brine and limestone, has become the largest global producer, but domestic demand was weak last year. According to ANSAC CEO Christopher Douville, China is using tax advantages and other subsidies to grab market share traditionally served by U.S. soda ash.

ANSAC is lobbying the Obama administration to finalize the Trans-Pacific Partnership (TPP) free trade agreement so that U.S. soda ash exports to countries such as Vietnam and Japan would gain the duty-free preference China currently receives.

According to IHS Chemical, China has garnered about 15 percent of the soda ash traded globally in the past six years, even though costs are higher using the synthetic production process.

“The global soda ash market is undergoing significant change since naturally produced soda ash is now overtaking market supply and synthetically produced capacity, except in China and India, is declining,” said Marguerite Morrin, director of the global soda ash service at IHS Chemical. “There has been an influx of new supply of natural soda ash from Turkey, which is both cost-competitive and more sustainable than synthetic production. As a result of this cheaper supply, more costly synthetic supply from high-cost producers, particularly in Europe, is being threatened, shut down, or idled.”

About 2.4 million metric tons of synthetic soda ash capacity has closed since 2009 because it was no longer price competitive.

Global annual consumption of soda ash is more than 55 million metric tons (MMT), according to the 2014 IHS Chemical Soda Ash Analysis. U.S. production last year was 11.4 MMT, according to the U.S. Geological Survey. Of that, 6.4 MMT were exported. Most growth in consumption is coming from outside the United States, where consumption has been flat for the past five years.

The interesting new wild card in the market is Eti Soda, which began its production in Turkey five years ago with plans to produce 4 million metric tons annually by 2019. “Eti Soda is expected to be disruptive during the next five years, particularly for the well-established European chemical industry,” Morrin said. “It’s clear that the new low-cost Turkish supply, with a competitive cost base and low transport costs relative to the U.S. producers, will continue to influence the market. We just do not know yet to which extent.”

Another wild card for U.S. supply is the royalty payments required for soda ash mined on federal properties. Congress set the royalty rate at 2 percent in 2006, boosting exports. In 2011, the rate was hiked to 6 percent, and then lowered again to 4 percent last year.

Still another issue is the climate change factor, which is becoming a part of some purchasing scorecards. Synthetic soda ash production emits twice the carbon emissions as natural soda ash processes and also requires much more energy. Imports of synthetic soda ash into the United States are insignificant, however, according to Thomas P. Dolley of the U.S. Geological Survey.

According to Dolley, end-uses for soda ash are glass manufacturing (including fiberglass), at 48 percent of total annual consumption; chemicals, 29 percent; soap and detergents, 8 percent; distributors, 6 percent; flue gas desulfurization and miscellaneous uses, 3 percent each; pulp and paper, 2 percent; and water treatment, 1 percent.

Depending on chlor-alkali economics, caustic soda may be an economical substitute for soda ash in certain uses, such as pulp and paper production, water treatment, and certain chemical applications. In addition, soda ash, soda liquors, or trona (raw ore) may be used as feedstock to manufacture chemical caustic soda, which is usually produced as a co-product with chlorine.

Top photo credit: FMC Corp.  This article was originally published at My Purchasing Center and has been republished with permission. For more stories, visit MyPurchasingCenter.com.
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