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Glass production to drive soda ash demand

Global consumption of soda ash dropped 7.6% in 2009 to 44Mt, following growth of 4.2% per year between 2000 and 2008. This was caused by a drop in purchases from the glass industry, which accounts for…

Global consumption of soda ash dropped 7.6% in 2009 to 44Mt, following growth of 4.2% per year between 2000 and 2008. This was caused by a drop in purchases from the glass industry, which accounts for 53% of total demand, along with lower detergent and chemical output, the other major end-uses for soda ash. Emerging economies have been the growth driver for soda ash over the last ten years with rising GDP and urbanization leading to higher per capita use of products manufactured using soda ash. China was one of the few countries with a positive increase in soda ash consumption in 2009 and was responsible for 90% of global growth between 2000 and 2009. On the other hand, in industrialized economies, demand for soda ash has been flat due to the maturity of products using soda ash in the market, substitution and competition pressures. The forecast for the future demand for soda ash is of an annual 3% growth over the next five years, to be led by flat glass, detergents and water treatment. Increased demand could also come from the use of soda ash in mining and metals and flue gas desulphurization. Emerging economies such as China and the wider Southeast Asia region, the Middle East, South Asia and South America, are expected to continue to provide the best opportunities for soda ash demand growth on a regional basis. The outlook for developed economies is more uncertain. China, the US and Europe have a highly concentrated production of soda ash and together accounted for 80% of total production in 2009. Acquisitions in the mid- to late-2000s consolidated ownership of capacity, with Tata Chemicals and Nirma of India now having operations in more than one region, and operating both natural and synthetic capacity. Chinese companies have increased synthetic capacity rapidly and some are now of comparable with natural producers in the US. Other countries have also seen the opening of new capacity, most recently in Turkey in 2009. Total soda ash production capacity is now 63Mt per year; operating rates are recovering from 70% in 2009, but must still work hard to reach the 85% seen in 2007/08. New and expansion projects may be able to add 15Mt per year to total capacity by 2015, with China contributing significantly to this total, and other emerging economies the remainder. China appears to be moving fast towards substantial overcapacity, although more stringent government targets for raw material and energy consumption could see some rationalization of older capacity by 2015. China and the US are competing for sales in East/Southeast Asia and South America, which do not have enough domestic soda ash capacity. In other areas, soda ash does not often move out of the region in which it is produced, because of its low cost and high bulk characteristics. China, on the other hand, is one of the few countries that can compete with lower-cost natural soda ash exported from the US, due to costs at synthetic plants being below the norm in other regions, but also due to its control of global shipping. Input costs for synthetic soda ash plants are very unlikely to fall back to early-2000s levels, and will in all probability increase; the lower-cost of natural soda ash production could therefore present an opportunity for producers in the US, Kenya and Turkey to restore and/or increase market share in deep-sea markets, which continue to grow. Exports of lower-cost soda ash from Turkey are expected to have an effect on higher-cost synthetic producers in Europe, with short-term capacity rationalization also expected in Europe. Energy prices underwent a significant increase in late 2007/early 2008, increasing input costs at natural and synthetic soda ash plants. Moreover, rising input costs caused prices of soda ash to increase across all regions between 2006 and 2008. Decreased demand in 2009 pushed producers, in turn, to drop prices, but these did not keep up with the fall in the price of energy as most sales are made on long-term contracts. Prices reached their lowest in late 2009/early 2010 when new contracts were being discussed, but are not expected to fall further as energy costs remain high compared to the early-2000s. In the short-term, prices will continue to keep up with energy costs and could reach 2008 levels by 2015. Price increases should come from a return to high utilization rates; but capacity seems more than enough to meet demand in the period to 2015 and increased competition could prevent significant price rises.

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