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High salt prices hit soda ash makers

Rutam Vora  |  Ahmedabad 

A crisis is brewing for as high have started hampering soda ash and caustic soda production in the country.

As many as 40 soda ash and caustic soda makers in the country, which also include GHCL, Ltd (GACL), Ltd, seem to be facing higher raw material costs. This has led to an increase in their production cost.

“The industry is facing a problem of high raw material cost which is pressuring margins and affecting the economic viability of production. If continue to rule firm for a longer period, many of the caustic soda makers may have to downsize the production, while some may face closure of units too,” said Y R Singh, executive director, Alkali Manufacturers’ Association of India (AMAI).

Salt is in short supply not only in India, but also overseas, which is reflected in the high global prices. This might lure salt makers to export higher volumes this year than any regular season.

“The supply is less globally. This may cause Indian salt exports to rise as compared to normal exports from the country. This year we expect salt exports to surge by 25 per cent to around 3 million tonnes from a traditional export of 2-2.2 million tonnes,” an industry source and a past office bearer at the Indian Salt Manufacturers’ Association informed.

However, the industry body is proposing for a temporary ban on exports of salt. According to the alkali industry players, in order to safeguard the interest of the caustic soda makers and soda ash makers in the country, government intervention would be required to control “Salt prices have almost doubled in the past few months due to erratic weather conditions in producing regions in the country, especially western India. As a solution to control spiralling salt prices and help the alkali industry, the government must put a temporary ban on the salt exports,” said Singh, adding that the industry body has already appealed for an anti-dumping duty on the caustic soda imports. Currently, imports are not happening mainly because of high international prices. But once the domestic manufacturers pass on the cost burden to the consumers, they will shift to imports of caustic soda, an industry source informed.

Fearing a possible reduction in the production due to high salt prices, Sunil Bhatnagar, president (sales and marketing), Gujarat Heavy Chemicals Limited (GHCL), said, “The prices have already started rising and it is badly affecting our costs as salt is the key ingredient for the soda ash industry. Salt Manufacturers have commenced large volume of exports. This is likely to impact domestic availability and a fall in the availability of salt may affect the production of soda ash adversely.”

Echoing similar sentiments, a senior official at the said, “The situation is already hampering production costs.”

In the international market, the caustic soda prices hover at around $385-400 a tonne, while soda ash prices are at $ 230 a tonne. Internationally, China, Taiwan, Saudi Arabia and the US are the key manufacturers of caustic soda.

In India, the caustic soda makers face cost burden from electricity cost and salt prices, which are the main factors deciding India’s competitiveness in the international market. Currently, in India, caustic soda prices are at Rs 15,000-17,000 a tonne at different places in the country.

Meanwhile, some of the industry players are of the opinion that caustic soda prices will get a lift as the offtake will pick up from February onwards.

“Usually, December and January are considered to be lean months for the caustic soda industry. The actual demand picks up post February. So, we expect the prices to rise to Rs 18,000-20,000 a tonne in the near future. However, salt prices are affecting the margins but looking at the good prospect for salt crop we are hopeful for the situation to get normal in some time,” said Guruprasad Mohapatra, managing director, GACL.

The industry consumes around 11 million tonnes of salt per annum, while the total production of salt is estimated to be around 18-18.5 million tonnes in the current year. The production estimates show a decline by 30-35 per cent from last year due to climatic disruptions. On the other hand, the salt makers assure adequate supplies for edible purpose, which may not see a steep price rise as was seen in industrial salt.

First Published: Fri, January 21 2011. 00:10 IST