OUTLOOK ‘15: US soda ash poised for growth, gently rising prices

HOUSTON (ICIS)–The US soda ash market will continue to see domestic demand growth on par with macroeconomic expansion – and likely slightly higher prices – in 2015, while producers continue to aim for increased production output and increased global sales in developing economies.

Producers will likely enjoy a modest increase in domestic demand and have proposed price increases of $15-25/ton ($16-28/tonne) for 2015 annual contracts with most producers seeking increases of $15/ton.

But producers’ main focus will be on their efforts of gaining sales and price increases in export markets where soda ash consumption is growing faster than in developing nations, mostly bustling economies in Asia, Latin America and some in Africa and the Middle East.

Internationally, worries about a slumping Chinese economy are at least partially offset by reductions in  production capacity among high-cost producers that may aid in efforts to gain higher prices in export markets.

What that means for the domestic contract will likely depend on the success of producers’ international efforts, market watchers and participants say: If global sales remain strong, producers are likely to be happy with smaller domestic price increases. If global economies slow significantly, though, efforts to increase domestic market margins will intensify.

A sustained reduction in global oil prices may aid on both sides. Producer margins are likely benefit from cheaper production and transportation costs, and buyers may benefit as well.  

Hanging over the market is how the competitive picture may change with the divestiture by FMC Corp. of the US’s largest trona mining and natural soda ash production facilities. That company will focus on agricultural chemicals and health and nutrition products and get away from the commodity mineral.

Likely players include those already in the US market, including Solvay, Tata Chemicals North America, OCI Chemicals and Nirma, the owner of Searles Valley Minerals, the only producer outside of Wyoming’s Green River Basin.

Nirma bought the Searles Valley facilities in California in late 2007. The other subsidiary of a conglomerate based in India, Tata Chemicals North America (Soda Ash), has operated a mine in Green River since 1968.

The other recent change of ownership was the creation of a master limited partnership to take 50% of the OCI operations through OCI Resources.

Both FMC and OCI decided to get out of commodity minerals to focus on value-added products, solar power being one of OCI’s chief pursuits.

In export markets, US producers are facing less production capacity, which has provided an upward lift on demand on more cheaply-produced US natural soda ash, refined from the mineral trona.

The American Natural Soda Ash Corp. (ANSAC) estimates that global demand outside of China will increase to 31.98m tonnes in 2015, slightly beyond the projected production capacity of 31.3m tonnes.

Production cutbacks include a number of plants, most using the Solvay method of production which includes chemical reactions and more energy input than US production.

Idled capacity

That should help producers gain price increases, as they have in Asia this year, in most global markets, according to this argument.

Domestic sales are increasing, albeit modestly, reversing a long-term decline as consumer tastes and product fashions shift away from glass containers and powdered detergents and toward plastic and aluminium bottling and liquid detergents and soaps. Glass and soap are two important derivative products that consumer soda ash.

Apparent domestic consumption in 2014 has been above the 2013 level for each of the first three quarters of 2013. Still, US consumption in 2014 is on track to be about 27,000 tonnes more than 2013, only a slight increase.

US production through October hit 9.64m tonners, up 110,000 tonnes from the 9.53m tonnes produced during the first 10 months of 2013, according to figures from the US Geological Suvery (USGS). That’s just over a 1% increase.

The expected 83,000 tonnes likely to go to the export markets where the US shipped 4.94m tonnes through the first nine months of the year, according to Census data reported by the USGS. That’s up from 4.81m tonnes shipped to foreign buyers in during the first nine months of 2013, according to USGS figures.

Shipments to the US’s Top 5 export markets this year are up in three with a net gain of 113,000 tonnes.

Top five US soda ash export markets

 Source: US Geological Survey