Normality and Abnormality of the Soda Ash Sector in 2010    

By Wang Xiling, Secretary-General of China Soda Ash Industry Association   

1. Looking back at 2010

In 2010 both international and domestic soda ash markets fluctuated across a bigger margin than ever seen before. Enterprises made profits in some months and suffered losses in other months with alternating joys and worries. On the whole, the soda ash sector had seven major features in 2010.

(1) Production changed periodically

By the end of November 2010 the total output of soda ash in China was 18.39 million tons. It is expected that the output in the whole year will be around 20.10 million tons, an increase of around 1.38 million tons, and 7.37% over the previous year. The output of soda ash was unexpectedly stable from January to August, with a monthly output difference of only around 10 000 tons. Due to impacts from energy conservation and emission reduction, the monthly output from September to October was 20 000-50 000 tons lower than the previous month. Stimulated by the price rise of products and the reduction of power supply restrictions, the monthly output in November increased remarkably, being 100 000 tons higher than the previous month.

(2) The export volume fell significantly

By the end of November 2010 the total export volume of soda ash exported from China was 1.46 million tons. It is expected that the export volume for the whole year will amount to around 1.60 million tons, a drop of 720 000 tons and 31% from the previous year. The main reason was that, with impacts from the financial crisis, the price of soda ash in the domestic market was at the lowest historical level in 2009. Prices in the international market were higher. Great quantities of soda ash in China therefore flew to the international market and the export volume hit a historical high. Then, in 2010 the domestic price was mostly restored and was higher than international prices. Traditional exporters tried to reduce their export volume as much as possible and nontraditional exporters stopped their export altogether. The export volume therefore was drastically reduced compared with the previous year.

(3) Domestic consumption increased remarkably

Various economic sectors in China had a restorative development in 2010 after the financial crisis. The consumption of soda ash in the domestic market, therefore, increased remarkably. It is expected that the consumption for the whole year will turn out to have been more than 10% higher than the previous year.

(4) The market fluctuation violence was unprecedented

With impacts from the financial crisis, the production load of the soda ash sector was at a relatively low level at the end of 2009. Due to the combined effects of the Spring Festival holiday and the demand increase, the market price of soda ash went way up from January to March 2010 and the growth reached an abnormal level of 30%. The price once again dropped to the bottom with a reduction margin of 30% from April to August. The output of soda ash was quite stable from January to August. The average monthly output was 1.67 million tons and the difference between the highest output and the lowest output was not more than 20 000 tons. There was no reason at all for market fluctuations. The situation was therefore worth reflection. With the enlarged scope of the power supply restriction, the output of soda ash dropped from September to November, but the reduction margin was very small. The output of soda ash was down to 1.64 million tons in September, a drop of 50 000 tons from the previous month. The output was 1.62 million tons in October, being only 20 000 tons lower than in the previous month. Nevertheless, such a small output reduction led to a rapid rise of the market price with an astonishing margin of around 50%. The output was 1.72 million tons in November, an increase of 100 000 tons over the previous month. The price of light soda ash dropped rapidly in December and the price difference between light soda ash and heavy soda ash widened, posing a direct threat to the price of heavy soda ash. The output of soda ash in the whole year of 2010 was stable with no drastic increase or drastic reduction. The demand also increased stably with no abrupt acceleration. The price fluctuation was however extremely wide. The main reason was the lack of calmness in enterprises of the soda ash sector itself.

(5) Light soda ash and heavy soda ash had abnormal prices twice

Heavy soda ash is produced with light soda ash as raw material through several steps such as hydration, separation and roasting. There are no changes of the chemical properties, but the cost is increased substantially. It is therefore only normal and rational for the price of heavy soda ash to be moderately higher than the price of light soda ash in the market. The price was abnormal twice in 2010 however. The first time was from July to August, when the price of heavy soda ash was lower than the price of light soda ash. The second time was in December, when the price of heavy soda ash became far higher than that of light soda ash, way beyond the moderate and rational scope.

(6) The production cost reached a historical high

Due to the constant price rise of raw materials, fuels, powers and transportation essential for the soda ash production, the production cost reached a historical high in 2010, bringing huge threats to the existence and the development of enterprises.

(7) There were still losses

With the impacts from the global financial crisis, the soda ash sector and its upstream/downstream sectors all suffered losses in 2009. This was of course quite normal for that year. In 2010, however, upstream sectors and downstream sectors all reaped handsome profits and only the soda ash sector sandwiched in between failed to shake off the shadow of losses. Root causes should be identified and measures for reversing losses and increasing profits should be taken.

2. Looking forward to 2011

Lots of new capacities will start production almost at the same time in 2011. The seriousness of oversupply and the fierceness of market competition will likely be higher than 2010. The price rise of raw materials and fuels will increase the cost and profit-making pressure. Therefore, among the work focuses in 2011, these remain:
    * Fostering, consolidating and promoting market stability
    * Implementing energy conservation and emission reduction
    * Taking measures to reverse losses and increase profits.

(1) Output    

As new soda ash facilities have started production one after another in recent years, China's capacity has been constantly increasing. Another lot of new capacity will be completed and put on stream in 2011. It is expected that, despite the adoption of measures to control the total output, it will reach 21.50-22.00 million tons in 2011, an increase of 1.50-2.00 million tons over 2010. Output and sales will be basically balanced. If the controls are unsuccessful and the output gets much higher, the trend of oversupply will be aggravated in 2011.

(2) Export

It is reported that no soda ash in Europe will be supplied to Asia, and soda ash production in the United States cannot fully meet the demand in Asia in 2011. Therefore, there will be a considerable opportunity for China to export soda ash. It is expected that the volume of soda ash exported from China in 2011 will be around 400 000 tons higher than in 2010, with the total export volume likely to increase to 2.00 million tons.

(3) Consumption

The year of 2010 saw the fastest year-on-year growth of soda ash consumption in China ever. (Due to the financial crisis, the base number in 2009 was re