US natural soda success a worry for Europe synthetic producers

16 July 2013 15:25  [Source: ICIS news]

LONDON (ICIS)--The success of US natural soda ash producers in flooding South America and east Asia with exports demonstrates that Europe's synthetic soda ash producers may face a battle to hold on to market share, Raiffeisen Centrobank (RCB) said on Tuesday.

The main threat to European synthetic soda ash makers, such as Belgium-based Solvay and Poland-based Ciech, is posed by natural soda ash producers in Turkey, where the world's largest soda ash facility – a 2.5m tonne/year plant which Turkey's Ciner conglomerate and China's Tianchen Engineering Corporation want to complete by early 2017 – is under construction, RCB added.

Despite relatively high transport costs, some 6.1m tonnes of soda ash, amounting to approximately 55% of the output in the US last year, was exported in 2012, with 44% going to South America and 25% to east Asia, the investment bank said.

“While major [export destination] countries included Brazil, Mexico and Indonesia, there were also some exports to Europe – amounting to almost 0.5m tonnes – with the Netherlands among the largest buyers,” said RCB analyst Dominik Niszcz.

“This confirms that in the long term, following completion of the new projects, Turkish [natural soda] production may also harm the Western European market, owing to the cheaper method of  production, lower  environmental  regulations and shorter transport routes, and may have an impact on Ciech’s markets, especially in Romania,” he added.

The production of natural soda ash, which is derived from trona deposits, in May jumped 10% month on month and 18% year on year in the US, the US Geological Survey (USGS) said on 12 July.

Among American producers of natural soda ash is FMC Corp, which, according to RCB, has reserves that could cover several hundred years of global soda ash consumption.

Looking at the impact of Turkish natural soda on European markets to date, Niszcz noted that Solvay, in its first-quarter results, “reported an 8% decline of its soda ash volumes in Europe, partly related to the weakness of the southern economies, but also impacted by soda supply from Turkey”.

Europe's synthetic soda ash producers were currently enjoying falling coal prices – partly thanks to the displacement of coal into export markets of American coal which was not needed domestically because of the energy available from the US shale gas revolution – but if European environmental regulations were to force those prices up, the companies would be more exposed to exports of natural soda ash, Niszcz added.

Ciech, which is controlled by Poland's treasury ministry, has been put up for sale to strategic investors.

By: Will Conroy
+44 20 8652 3214

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