Soda ash companies considering phased expansion

slow demand growth from glass industry is seen as a big challenge

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With the anti-dumping duty (ADD) on soda ash set to end by 2017, the industry is getting its act together by planning phased capacity additions. However, lack of demand especially in the glass industry is seen as a challenge to capacity expansion of soda ash plants.

Over the next five years, the industry is set to expand its installed soda ash capacity from current three million tonnes to four million tonnes per annum. Anti dumping duty (ADD) is going to end in mid 2017 hence soda ash producers have to work on overall cost to remain competitive going forward and higher capacity will help keeping per ton cost lower.

Soda ash demand is growing at a normal pace of about 4 to 5% annually. However off late, a large part of this growth is met with imports which have been steadily increasing. The pace of growth in the first quarter of current financial year has been slightly muted basically on account of lower off take by the detergent sector at the back of lower rural demand.

"In order to remain competitive and bring down costs as well as to take care of the growing domestic demand, the industry is reportedly looking at an expansion of almost one million metric tonne in near future," said R S Jalan, managing director of GHCL Limited.

GHCL's current installed capacity is 850,000 tonne per annum and it is likely to go up to one million tonne per annum.

The industry has been attempting to remain competitive with international prices other than in the southern and eastern parts of the country where imports are more viable on account of cheaper logistic costs. However China with a capacity almost 10 times the size of the Indian capacity and US with their natural soda ash having a huge cost advantage, remain a threat to the Indian industry.

Talking about anti-dumping duty, Jalan said, "Post the removal of duties, industry will have to content with prices of imported product at that point of time and if these countries along with other importers were continue to dump cheaper product, we will need to approach the government of India for extension of the ADD."

China with capacity of almost 10 times the size of the Indian industry continues to remain a major threat. However, the Indian industry is resilient enough to counter the Chinese threat as has been done in the past. If however the Chinese manufacturers were to resort to dumping of cheaper goods the industry will need to approach the government once again.

"Glass industry is very conscious about cost as soda ash is important component for glass manufacturing. If soda ash price will be better the glass manufacturing can be done more efficiently. However, dependability on import is not that much but price of soda ash is always concern for glass industry as domestic price of the commodity is higher than international market because of ADD", said Ashok Jain, whole time director of Gujarat Borosil Limited.

Domestic price of soda ash is about Rs 20,000 per tonne while with ADD imported soda ash cost is nearly 17,000 a tonne. After ADD end, the gap between domestic and international prices will be around 20%, said industry sources.