Soda Ash Is Hot

After years in the doldrums, the U.S. soda ash business is hot. The driving force is unprecedented demand from growing economies in Asia and Latin America, where the versatile mineral—sodium carbonate, in chemical terms—is used to make glass and detergents and to treat water.

To meet the burgeoning demand, FMC Corp. says it will recommission all of the mothballed soda ash capacity at its Granger, Wyo., facility. The additional 700,000 metric tons will bring total capacity at the site to 1.3 million metric tons per year by 2012.

The U.S. soda ash market has even attracted foreign players, specifically two Indian companies. In early January, Nirma, an Indian manufacturer of detergents and industrial chemicals, acquired Searles Valley Minerals, a producer of soda ash and other inorganic chemicals at three sites in California's Mojave Desert. At the end of January, Tata Chemicals signed a definitive agreement to acquire the Wyoming soda ash business of General Chemical Industrial Products for $1 billion.

Following the Asia financial crisis, which occurred between 1997 and 1999, U.S. soda ash producers shut down 2 million metric tons of capacity, recalls Dennis Kostick, senior minerals commodity specialist for the U.S. Geological Survey. The turnaround has been remarkable. Kostick says he hasn't seen the soda ash market so "snug" since he began following the industry in 1979.

Though U.S. consumption remains stagnant, the U.S. soda ash industry is "sold out" because of export demand, Michael D. Wilson, vice president of FMC's industrial chemicals division, told stock analysts during an earnings conference call earlier this month.

World market conditions now favor U.S. producers. After Chinese companies began outproducing U.S. makers two years ago, local demand rose and a 13% export tax rebate was abolished in mid-2007. As a result, Chinese producers have become less competitive internationally. Also, China's synthetic soda ash costs more to make than the natural soda ash produced in the U.S.

Looking forward, Wilson said Chinese makers will be even less competitive because of energy cost increases, environmental pressures, tightening credit and lending practices, and the upward revaluation of the Chinese yuan.