Sluggish Demand for Soda Ash    

1. Performances of China's soda ash industry in 2009  

(1) Both capacity and output of soda ash kept growing

As of the end of 2009, China's total soda ash capacity reached 24 million t/a, accounting for approximately 28% of the world's total, and China's annual output reached 20.014 million tons, up 8.7% year on year, with an average capacity utilization rate of 83.4%. At present, China has nearly 60 soda ash producers. Among them, eight large soda ash producers have a soda ash production capacity of more than 800 000 t/a each, including Shandong Haihua Co., Ltd., Tangshan Sanyou Chemical Industries Co., Ltd., Sinopec Nanjing Chemical Industry Co., Ltd., Qinghai Alkali Industry Co., Ltd., Inner Mongolia Berun Holdings Limited Group Co., Ltd., Hubei Yihua Chemical Industry Co., Ltd., Tianjin Soda Plant and Henan Jinshan Chemical Co., Ltd. Their combined production capacity accounts for 50% of China's total. The centralization and gigantism of China's soda ash industry have become an inevitable development trend.
   At present, China's soda ash capacity is significant in surplus. With construction of new soda ash units, China's soda ash capacity increases rapidly. In 2009, the operating rate of China's soda ash plants was about 83.4%, lower than the levels of previous years. Even if the global financial crisis would have not happened in the second half of 2008, the overcapacity would also become a serious problem in 2009. Now, China has nearly 4 million t/a excess capacity.

(2) Exports continued to grow

Due to the severe impact of the global financial crisis and the rapid rise of oil prices after a brief drop during the financial crisis, shipping costs were still relatively high. In addition, in 2009, both the output and export of American trona companies declined. Because China's soda ash makers has established a stable international sales network, China's soda ash export volume increased 9.1% year on year to 2.323 million tons in 2009. As raw material prices declined, the export price of soda ash was lower in 2009 than in 2008, and the export margin decreased markedly in 2009.

(3) Prices fluctuated at low levels

Due to impact of the global financial crisis, in the Chinese market, the price of soda ash dropped rapidly from RMB2 000/t in the middle of 2008 to RMB1 250/t at the end of 2008. This RMB1 250/t price has been maintained until late October 2009. In November 2009, due to the rise of crude oil and coal prices along with the increase in soda ash exports, the soda ash price began to rise slightly in the Chinese market.

(4) As the downstream production slowed down, demand for soda ash was sluggish

In recent years, the rapid expansion of China's soda ash capacity was related to the rapid development of salt chemical industries in many provinces. The rapid development of downstream industries stimulated and drove up the building of soda ash units. In 2009, major downstream industries of soda ash maintained varying paces of growth, but the growth of flat glass and alumina, which are the two largest consumers of soda ash, slowed down markedly. Therefore, despite the rapid growth of other consuming industries, the domestic demand for soda ash was sluggish.


2. The outlook of China's soda ash industry in 2010

(1) Capacity will continue to increase

Because the production of soda ash had a relatively high gross margin during 2006 to 2008, many new soda ash plants were built in 2008 and 2009 in many places of China, especially in Midwest China where are abundant in salt and coal reserves. Most of the new plants use Hou's process. At the same time, the trona projects were built in Henan province. China's total soda ash capacity will be added by around 3 million t/a in 2010. On November 27th, 2009 the Chinese Ministry of Industry and Information Technology (MIIT) released the draft of Entry Requirements of the Soda Ash Industry (CCR2009 No.35), which proposed that new soda ash projects must meet the following capacity requirements: the minimum design capacity of Solvay process units is 1.2 million t/a each, and the minimum design capacity of Hou's process units is 600 000 t/a each. Once this regulation is officially implemented, it will help to control the expansion of China's soda ash capacity.

(2) Exports will reduce

Despite the obvious signs of global economic recovery, China's soda ash export amount in 2010 will reduce and is expected to be 300 000 to 400 000 tons less than in 2009. In October 2009, the Indian Ministry of Finance announced to levy a 20% special protection tariff on imports of China-made soda ash. This will lead to a sharp drop in export to India. Turkey's 1 million t/a trona plant has recently been put into production. Because it is close to the Middle East, it has a great impact on China's soda ash export to this region. Moreover, with the global economic recovery, the United States' trona export will pick up. So China's soda ash export will face increasingly fierce competition in 2010.

(3) Domestic production and demand will rise slightly

With China's rapid economic recovery and fast development pace, the automotive and house building industries are developing constantly and contribute a steadily growing demand for glass. Moreover, the detergents, chemical, light and chemical fertilizers industries will also maintain a high growth rate. But the output of alumina will be less likely to increase. And alumina leaching process is now gradually using caustic soda to replace soda ash. Taking all these factors into account, China's domestic demand for soda ash in 2010 will be a little higher than in 2009, up about 5%. As export may decrease, China's soda ash output growth is expected to be only 4%.

(4). Prices will rise slightly

Because most of China's major soda ash producers suffered losses in 2009, they may reduce their output in 2010. Moreover, prices of major raw materials for making soda ash are expected to rise in 2010. Because of these factors, it is expected that soda ash price will rise slightly in 2010.

(5) China's soda ash industry is imperative to implement circular economy

At present, MIIT has proposed some threshold requirements to new soda ash units but also requested that existing soda ash enterprises must meet these threshold requirements by 2015 and their water recycling rate must be higher than 95%. Therefore, China's soda ash industry has to implement circular economy, and energy conservation and environmental protection will be the key to its future development.

China's soda ash production in recent years
Year    Output/million tons    Year-on-year growth/%
2001    9.06    9.7
2002    10.12    10.4
2003    11.00    8.7
2004    12.50    13.6
2005    14.10    12.8
2006    15.90    12.5
2007    17.70    11.3
2008    18.81    6.4
2009    20.01    8.7
Source: CNCIC

China's import and export of soda ash in recent years
     (thousand tons)
Year    Import     Export
2001    68.7    1 103.6
2002    293.7    1 147.1
2003    301.0    1 255.0
2004    197.2    1 429.9
2005    70.6    1