Global soda ash industry – emerging dynamics

• What is soda ash?
• Industry demand supply
• The rapid rise of Turkey’s soda ash production

What is soda ash?

Soda ash is amongst the top 5 major inorganic chemicals in the global chemical industry with a total global production volume standing at ~55 million tonnes in 2018 and an industry value estimated at USD 16 Billion. The chemical name of Soda Ash is sodium carbonate. The global soda ash industry constitutes of two production types, i.e., natural soda ash and synthetic soda ash production. Natural soda ash is mined from Trona, which is a naturally occurring mineral ore whereas synthetic soda ash is made using limestone, salt and coke using the Solvay process. The primary grades of soda ash which are utilized globally are Dense Soda Ash and Light Soda Ash.

The demand for the product is widespread and constitutes of several industry groups like glass, metals, textiles, detergents & soaps. The glass industry forms the largest end user industry of dense soda ash with over half of the soda ash production being used in glass production on a global scale. Light soda ash is primarily used for aluminum cleaning, dying and water softening. Light soda ash is also used to make baking soda that finds application in the food, leather tanning, fire extinguisher, metals, chemicals and personal care products industry. This makes soda ash a critical inorganic chemical in the global manufacturing value chain. Given its widespread utilization and demand, the chemical is highly traded on a global scale.

Industry Demand Supply Dynamics

The global soda ash production has increased at a CAGR of ~2.5% during the period 2010-2018 and stood around 55 million tonnes in 2018. The global production capacity of soda ash is concentrated in USA, China, Europe and India.

The manufacturing capacity of soda ash is highly concentrated with China and the US controlling ~64% of the total global capacity. The import demand of the chemical is globally spread given its diversified end user industry base. The top 5 importing countries by volume are India, Brazil, Mexico, Indonesia and Germany which together account for ~44% of the global import demand volume.

The large demand requirement has enabled limited surplus production for export from most countries and has led to a high degree of concentration in the export supply market. This includes China, which has the largest production capacity of soda ash but is also the largest consumer of soda ash. China exports ~9% of the total global supply volume of soda ash even though it holds ~45% of the global production capacity. Furthermore, the top 5 countries are controlling almost 86% of the total global export volume. The US is the largest exporter of soda ash providing ~43% of the total global volumes followed by Turkey.

Turkey exported ~21% of the total global volumes and has taken on an important position backed by a consistent increase in the soda ash capacity during the past few years. A number of macro factors have played a role behind the rise of Turkish exports, which supported the growth of the industry and made it one of the most prominent players on the global scale. The critical aspects that supported the growth of the Turkish industry have been detailed below.

The Rapid Rise of Turkey’s Soda Ash Production

The exports of soda ash from Turkey have grown at a CAGR of 117% during the period 2014-18. This has helped Turkey emerge as the second largest exporter of Soda Ash in 2018. The export volumes from Turkey have risen from 0.29 Million Tonnes in 2014 to 4.3 Million Tonnes in 2018. The country has become a key global supplier of soda ash to several large importing countries like India and Indonesia. 

The key factors behind the rapid rise in the exports of soda ash from Turkey are:

1. Ramp up in domestic production capacity: Turkey has steadily added ~5 million tonnes of production capacity in 2016-17 which was followed by the establishment of one of the world’s largest production facilities of soda ash in 2018. This has given the country a significant surplus capacity to increase its export volumes to fill the growing demand base from large importing countries.
2. Chinese environmental curbs: During the years 2016-17, the Chinese government had devised effective measures to curb the environmental pollution that led to large scale closures and consolidation in polluting industries. The government was targeting air pollution in China caused by coal intensive industrial activities which has resulted in high emissions of carbon dioxide, sulphur dioxide, nitrogen oxides and particulate matter. This curbed the production of synthetic soda ash in the country due to the usage of coke and limestone in the production process. Given the fact that China controls ~45% of the total global production capacity of soda ash, the surplus production declined, and the export volumes of the country fell from a high of 3.2 million tonnes in 2015 to 2.45 Million tonnes in 2018. This caused a supply side shortfall leading to a rise in the price of soda ash during 2016.
3. Limited capacity additions in major production countries: Given the widespread global demand base of soda ash, the global demand growth creates an incremental requirement of ~1.2 million tonnes of soda ash every year. Global production capacity has seen no major capacity addition from any country except India and Turkey during the period 2015-18.

These factors changed the global supply structure with Turkey replacing China as the second largest exporting country of soda ash. The relative balance between the demand supply equation during the period has ensured that the prices have remained stable following the rise seen in 2016. However, in 2019 the increased global supplies have spoiled the balance leading to a significant fall in global prices.

We believe that the strong growth in Turkey’s exports and the ramp up in capacity utilization in the country is one of the major factors behind the increased global soda ash supplies. The country’s exports are expected to grow further going forward given the improved utilization of the new production facilities that were initiated in 2018. The global demand is expected to grow steadily in the short term creating an incremental requirement of 1.2-1.5 million tonnes. However, the global supplies can see a larger jump given the potential rise in Turkish exports coupled with higher capacity utilization levels in other major producing countries. This has the potential to create a further supply side pressure in the global industry and is expected to lead to further decline in the global price levels.