Soda Ash Industry Says Goodbye to Bottom    

Due to increasing production month by month, China's soda ash industry was thought to have entered a good recovery, although the prices were still slowly dropping. Moreover, many domestic producers reported that their operating rates were going up in the second half of 2009. The overall operating rate is said to have been around 80% at the end of 2009, well above the 60% experienced earlier in the year.
   In 2009 China's 71 companies together manufactured 20 million tons of soda ash, up 8.75% over 2008. The output in the fourth quarter contributed 30.5% of the year's total, 29.7% higher than the same period of 2008. In monthly production for 2008-2009, a valley appeared in the period of November 2008 to February 2009. The 24 months' bottom price was also seen in December 2008, according to Shanghai Zhongshan Chemical Market.
   In 2009 China exported 2.32 million tons of soda ash, up 9.1% year over year. Exports accounted for 11.6% of the total output. Export volume was 655 thousand tons in Q1, 625.9 thousand tons in Q2, 534.3 thousand tons in Q3 and 507 thousand tons in Q4, representing a dropping trend. The boom in Q1 was mainly supported by the new export rebate policy. The depreciation of US dollars in the second half impacted Chinese-made soda's competitiveness in the global market, which can be illustrated by the downward trend of export prices. On the other hand, domestic demand increased in the second half, helping to reduce the necessity of exports. Exports to Indonesia, Korea, India and Thailand together made up 50% of the year's total.
   As for December 2009 China's soda ash consuming industries, including chemicals, metallurgy, papermaking and pollutant treatment, all witnessed high growth year on year. The production value of the chemical industry in December increased 39.5% year over year, the cumulative growth for the year was 7.4%. In the chemical industry, key soda consuming sectors include flat glass, aluminum oxide, dyestuffs and detergents, all of which reported production growth. Aluminum oxide saw an annualized output growth of over 30% in December alone.
   Costs have been an issue for soda ash producers in 2009. Salt prices went up from RMB140 per ton in January to RMB220 per ton in December. Electricity prices increased by 5% annualized, and the prices of oil products gained a growth of 20%. Luckily, the prices of ammonium remained stable between RMB2 500 per ton and RMB2 700 per ton throughout the twelve months. Cost increases blocked domestic soda ash prices from going down and hindered exports too.
   The China Soda Industry Association commented that overcapacity is the biggest problem now faced by the soda ash industry. The boosted demand will possibly spark new expansions. Along with the idled units and the competition of US producers, domestic producers have to manage more challenges in 2010. The government is trying to help this industry to curb expansion by a new entry policy. However, the existing soda manufacturers still need to upgrade their technologies. Many domestic companies were reportedly eager to spend their profits in enlarging production scale but failed to fund R & D and renovations of wastes treatment.
   Several new projects will come on stream in 2010 or 2011. Qinghai Kunlun Alkali Company Limited's 1 million t/a soda ash projects in Delingha of Qinghai province is planned for startup in August 2010. (CCR2009 No.25) Shandong Haihua Co., Ltd. (SZ: 000822) is constructing a 400 000 t/a soda ash project that will soon start up.
   China's GDP is expected to grow 8%-9% in 2010, giving firm support for the soda ash players.