Market outlook: Battle brews for soda ash market shares

The natural soda ash market in the US is seeking to maintain its competitiveness relative to its main global competitor – the Chinese synthetic soda ash industry.

Downstream, about 50% of soda ash goes into glass-making production, which is utilised in the automotive industry.

A major challenge is the growing capacity of soda ash from China, which has threatened the profitability of US soda ash miners. About 90% of the US production of sodium carbonate (soda ash) comes from the Green River Basin in the state of Wyoming.

Wyoming State Geological Society
Natural US soda ash from trona mine

Over the past few decades, China has become the world’s largest soda ash producer. It had been a net importer. China has 60 synthetic soda ash plants, according to ICIS estimates.

China may also have the largest reserves of natural soda ash in the world, after the US. The US Geological Survey (USGS) has not been able to quantify the extent of the Chinese reserves, according to Wally Bolen, a commodity specialist with the USGS.

“The Chinese don’t differentiate between natural and synthetic, but you get the impression that China produces mostly synthetic. However, there are large natural deposits of trona in China,” Bolen said. Soda ash is derived from trona.

Bolen, who is a 30-year USGS veteran, has been the USGS’s data analyst for salt and soda ash for about two years. His predecessor, Dennis Kostick, met with a geologist who had travelled to China to study and map the trona deposits several decades ago. “Dennis always wondered why the Chinese did not fully exploit their trona deposits,” Bolen said.

“There are reportedly large deposits of trona in Chinese provinces,” Bolen said. “From an economical point of view, you use more energy in the manufacturing process in synthetic plants versus mining trona naturally,” he added.

STRATEGY FOR COMPETITIVENESS

Several US governmental leaders and industry officials have been attempting to overcome the Chinese market threat. One action taken by the US soda ash industry involved US miners banding together in the 1980s into an organisation called the American Natural Soda Ash Corporation (ANSAC), which has allowed them to transport and sell soda ash more efficiently and profitably to global markets.

According to Robert Fennell, ANSAC marketing manager: “We are able to streamline logistics costs since we move product as unit trains – every railcar is soda ash – to our ports, which are dedicated ports that only have soda ash going through them.”

“This allows for better throughput and removes the chance for cross contamination; better use of ships since we commonly fill the entire vessel with soda ash; and better use of foreign warehouse space,” Fennell added.

The US miners recently built a ship called the ANSAC Wyoming, which is now transporting 33,000 tonnes annually of soda ash to global markets.

The three US member companies supplying ANSAC with soda ash are Tronox, Tata Chemicals and Ciner Resources. The organisation has offices in the US, Hong Kong and Singapore.

A second option is to reduce the miner’s royalty rate on federal lands from 6% to 2% for five years. US Senator John Barrasso (R-WY) introduced legislation in Congress called the American Soda Ash Competitiveness Act. However, the bill was referred to committee and did not pass in 2015 legislative session.

OTHER COMPETITORS

Another challenge for the US soda ash market is new production from Turkey, which is expected to come online in August 2017. New Turkish production will increase global soda ash capacity by 2.5m annually.

Turkey may have the fourth largest natural reserves, following China (if confirmed), the US and Botswana.

To overcome the Turkish production challenge, US miners and buyers have been negotiating longer-term contracts for 2017. This to hedge against new Turkish production coming on line.

Pricing for US soda ash is set annually at the beginning of each calendar year. Prices for 2017 dropped about 3% over 2016. Pricing will likely drop again in 2018, after the new Turkish production hits the market place.

DEMAND IS IMPROVING

ANSAC
The ANSAC Wyoming which carries soda ash to global markets

Some good recent news for the natural soda ash industry is that demand for natural US soda ash in Asia is expected to increase in 2017 due to a supply crunch in the synthetic Chinese soda ash market. Some Chinese producers were operating at full capacity to fulfil orders, but as winter began in 2016, some plants in northern China were heard to have reduced their operation rates due to environmental issues.

More good news is that production from Wyoming’s trona mines in the US increased since the economic downturn of 2009. This has led to annual rises in soda ash production, according to Robert Gregory, who is a project geologist with the Wyoming Stage Geological Survey (WSGS).

“Back in 2008, there was a big reduction in commodities, so from 2009, the industry has bounced back,” Gregory said. “Production in Wyoming seems to be strong as it’s growing 1-2% a year,” he added.

Gregory says there are 109bn tonnes of mineable trona reserves left in Wyoming, of which two-thirds is soda ash. The WSGS has also forecasted an increase in production through 2020.

US EXPORTS RISE, IMPORTS PLUMMET

Production and exports of natural soda ash were up year on year, while imports were down. Natural US soda ash production was 990,000 tonnes in November 2016 or about 1.7% more than same month in prior year, according to USGS data.

However, Wyoming’s trona production was 1.55m tonnes in November 2016, which was slightly less than the previous month’s production, according to USGS data.

Exports of soda ash from the US in October 2016 was 560,000 tonnes, which was 22% more than same month in prior year, according to US Census Bureau (USCB) data.

Brazil and Mexico were the top export destinations in October 2016 with equal volumes of 88,100 tonnes each of soda ash. Australia and the UK each received approximately 35,000 tonnes each, which was double over prior month for both countries. Imports of soda ash to the US in October 2016 were 1,120 tonnes, which was 67% less than same month in prior year, according to USCB data.

Italy was the top supplier of soda ash to the US in October 2016 at 568 tonnes. Imports from France, Germany and the UK dropped significantly over prior month for all three countries.

Major producers of soda ash in the US are CINER Group, Nirma (Searles Valley Minerals), Solvay Chemicals, Tata Chemcials, and Tronox.