May 7, 2007
India’s Soda Ash Manufacturing Capacity From Synthetic Process Is At 2.7 Million Tonnes, Equivalent To 6.7% Of World’s Capacity
Research and Markets (http://www.researchandmarkets.com/reports/c56071) has announced the addition of "Indian Soda Ash Industry" to their offering.
Soda Ash is a high volume, low value product and finds application in production of detergents (42% light soda ash), glass (23% dense soda ash), chemicals (17% mainly light soda ash), et al. The industry is characterised by logistic & energy intensiveness, capital intensive and cyclicality.India's soda ash manufacturing capacity from synthetic process is at 2.7 million tonnes, equivalent to 6.7% of world's capacity. Since 2001, the industry is in growth phase and has grown at a CAGR of 11.3%.
The success for the industry lies in better integration/diversification, conservative financial policies, expert focus and cost competitiveness. We expect a lowering of the demand-supply gap up to FY'10. The soda ash prices are expected to remain stable over the medium term.
Soda Ash (commercial name Sodium Carbonate) forms an important part of the Chlor Alkali segment of the Indian inorganic chemical industry. It is in a solid form at normal temperature and pressure and is broadly classified into Light Soda Ash (LSA) and Dense Soda Ash (DSA) based on density. It is a high volume, low value product and finds application in production of detergents (42%, LSA), glass (23%, DSA), chemicals (17%, mainly LSA), sodium silicate, pulp & paper and water treatment.
The Soda Ash industry passed through the Basic Needs Phase (1950-1980), Consolidation Phase (1981-1991) & Liberalisation Phase (1992-2000) and entered the Growth Phase (2001 onwards) during which the industry has grown by 11.3% p.a.
Soda Ash is produced synthetically from limestone & salt and is also procured from natural deposits, trona, through calcining & filtering process. Synthetic soda ash process, which constitutes about 70% of the total world production, is further segregated into standard solvay, modified solvay and dry liming processes. Natural soda ash deposits are mainly available in USA (96%) and some other countries.
As on March 31, 2006, India's soda ash manufacturing capacity (fully from synthetic process) was 2.70 Million MT which was equivalent to 6.7% of the world capacity. China (33%), USA (26%) and Europe (28%) are other major producers of soda ash in the world.
There are only five producers of soda ash in India, viz. Tata Chemicals (0.875 Mn MT capacity), GHCL (0.6 Mn MT), Nirma (1.015 Mn MT; includes acquired capacity of erstwhile Saurashtra Chemicals), DCW (0.096 Mn MT) and Tuticorin Alkalis Chemicals & Fertilisers (0.115 Mn MT). Competition is mainly price based. Soda Ash constitutes about 25-30% of the domestic chlor-alkali market.
Soda Ash industry is characterised by logistic & energy intensiveness, high capital investment requirement and cyclicality. Hence, key to success lies in better integration/diversification, conservative financial policies, export focus and cost competitiveness.
Tata Chemicals Ltd. (TCL) has the highest level of diversification of business as chlor-alkali chain of products contributes only 28% to the total income of the company. It also has good level of integration as salt and limestone are procured captively. GHCL Ltd. (GHCL) has mining rights for lignite & limestone and it also manufactures salt thereby emerging as the lowest variable cost producer of synthetic soda ash in the world. Nirma Ltd. (Nirma) is forward integrated being a leading producer of soaps & detergents in the country. Almost 45% of Nirma's soda ash production is used captively. It also produces salt for captive consumption.
Indian Soda Ash industry, which previously depended on imports, has made forays in the overseas market also. Indian exports of soda ash increased from 2.5% of production in FY'00 to 14.9% of production in FY'05 making the trade balance positive (Trade Balance = Export -- Import) with reasonable margin. However, with the removal of anti--dumping duty in 2005, the imports rose again and the trade balance became negative during FY'06.
India is today in an advantageous position due to huge reserves of limestone, large production of salt due to a long coastline, energy-efficient technological plants, locational advantage to cater to the requirements of high growth nations and growing domestic demand. However, Indian players face the problems of comparatively higher electricity costs, lack of port infrastructure and higher local taxes.
After the take-over of Saurashtra Chemicals Ltd. (SCL) by Nirma in FY' 06, the number of players in the industry has decreased to five. Consequently, the Herfindahl Index of concentration, which measures the level of concentration in the market place, has increased to 0.29 from 0.21. Better financial strength and increased market presence of Nirma is expected to result into improvement in efficiencies of SCL's operations. With the overseas acquisitions by TCL and GHCL, the presence of Indian players in the international market would expand to the European and African markets as well. However, Indian players are unlikely to penetrate the US market. India's share in global soda ash capacities is expected to increase from 6.7% at present to almost 15% by 2008.
Demand-supply situation in China, business plan of American Natural Soda Ash Corporation (ANSAC, which is the marketing arm of Soda Ash manufacturers in the US viz. FMC Corporation, General Chemical, Solvay Chemicals and OCI Chemicals Corporation), demand from glass & detergent industry and crude oil prices are the major determinants of international soda ash prices.
We expect the global demand for soda ash to grow at 2.5-3% per annum over the medium term. Considering 41.9 Million MT of global demand at present, the demand would increase by almost 1 to 1.5 million MT every year. Of this additional demand, around 60% would come from India, China and Middle East countries. Our outlook for world soda ash prices is stable over the medium term. However, crude oil prices are a matter of concern. Increase in crude oil prices would further increase the cost of transportation and cost push price rise may be seen.
- GHCL Limited
- Tata Chemicals Limited
- Nirma Limited
- Tuticorin Alkali Chemicals & Fertilizers Limited
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