OUTLOOK ’14: US soda ash faces challenges in consumption, competition

HOUSTON (ICIS)–If 2013 marked the return of the US soda ash industry to near its previous peak, 2014 promises to be the year in which the industry sets new production and sales records.

But the industry will be facing a changing global marketplace: a general, long-term decline in US consumption and emerging markets where new sales opportunities abound; it will be aided by reductions of global capacity in some markets, but challenged by new upstarts elsewhere.

Getting to this point has not been easy. Drubbed by the economic meltdown in 2008-2009, the industry, tied closely to macroeconomic conditions and consumer confidence, the US industry has more limped than leaped back in the past 12 months.

A slow return of housing construction, commercial building and reviving auto sales has been the underpinning that has brought sales back to near-record levels.

US producers will come close to meeting or exceeding the production record of 11.3m tonnes set in 2008. It had dipped to 9.31m tonnes in 2009 and then worked back to 11.1m tonnes in 2012.

That is second to China’s 24m tonnes in a global market with total capacity of 52.9m tonnes. The distant No. 3 is Germany with 2.67m tonnes.

That is important because the US industry is now driven by exports. Export sales have exceeded US domestic sales since 2010. Therefore, the growth of the BRIC countries (Brazil, Russia, India and China) has been key, as well, both in competition and market sales growth.

First up for 2014 is the expected decrease in production capacity in Europe and elsewhere opening new market opportunities.

Global overcapacity has already been somewhat addressed. Two producers will close plants during the first quarter. Solvay has said that it will end soda ash production at its 230,000 tonne/year plant in Povoa, Portugal, by January and reduce capacity at its plant in Rosignano, Italy, to operate at an as-needed level. Tata Chemicals has announced that it will likewise close a 450,000 tonne/year plant in Listock, Cheshire, UK, by March.

This comes after Penrice closed a 285,000 tonne/year plant in Adelaide, Australia, in mid-2013. The US export consortium, the American Natural Soda Ash Corp., which represents FMC Wyoming, Tata Chemicals (Soda Ash) North America and OCI Wyoming, has won the contract to bring soda ash to Australia where it will now be distributed by Penrice in a new partnership.

US producers have an advantage in international markets because US soda ash is made by processing a naturally occurring mineral, trona, which is mined in Green River, Wyoming, and extracted from a lake bed in desert central California.  Most producers in Europe and Asia make soda ash from a chemical synthesis that requires significant energy expense.

That advantage was blunted in recent months by inexpensive product from China competing in international markets at prices that many market participants have described as below-cost.

That dynamic has reversed itself in recent months. Prices for Chinese product have taken the trajectory of a bottle-rocket since May, going from $188/tonne (€137/tonne) to above $240/tonne in December, much to the relief of US producers and those in other markets.

Besides the behemoth Chinese producers, the other prominent upstart is trona production set for expansion in Turkey. But that project has chronically lagged behind schedule and US producers shrug it off as a possible future threat, rather than an actual competitor, yet. 

Meanwhile, US producers are ramping up capacity at their Green River operations to capitalize on their cost advantage during a time of economic growth.   

Solvay has said it will increase capacity by 12% at its Green River Wyoming operations. FMC Wyoming also has an efficiency program in place that company officials say is already bringing production efficiencies and will be fully implemented during 2014.

Producers are projecting a modest 2% to 2.5% sales growth for 2014, but that may be modest, given this year’s growth rate of about 8% so far.

Major US producers also include Searles Valley Minerals, which operates in California, and OCI Wyoming, which operates in the Green River Basin.