Soda ash: Streamlining operations to ensure industry security

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Soda Ash: Streamlining Operations to Ensure Industrial Security
Author: Article source: China Chemical Industry News
Update date: December 27, 2013

Current Situation:
○ Continuous rapid growth in production capacity and output
○ Real estate and the automotive industry driving consumption
○ Severe polarization in enterprise sizes
○ Significant improvement in the level of processing equipment

Development Status:
(1) Production Conditions
Soda ash is an important basic chemical raw material. The soda ash industry has played an important role in promoting national economic development and improving people’s living standards, and it is widely used in industries such as the glass industry, chemical products, detergents, and alumina production. The image shows the soda ash production facility of Tangshan Sanyou Chemical Co., Ltd. in operation. (Photographed by Fu Dongying) Over the past decade, the production capacity and output of soda ash in China have experienced continuous rapid growth. In 2002, the production capacity of soda ash was only 11 million tons, while by 2012 it had reached 28.7 million tons, with an average annual growth rate of 10%. Among them, the production capacity of the combined soda process is 14.4 million tons, accounting for 50% of the total capacity ； The capacity of the ammonia-alkali process is 12.5 million tons, accounting for 44% ； The natural soda process has a production capacity of 1.8 million tons, accounting for 6%. According to statistics from the China Soda Ash Industry Association, the production of soda ash in 2012 was 24.01 million tons, an increase of 13.9 million tons compared to 2002, representing an average annual growth rate of 9%. Among them, the output from the double-alkali method was 12.02 million tons, accounting for 50% of the total output ； The output from the ammonia-alkali process was 10.32 million tons, accounting for 43% ； The output from the natron method was 1.67 million tons, accounting for 7%. Since 2003, China has held the top position in the world in terms of soda ash production capacity and output, with its exports ranking second only to those of the United States. In 2012, China’s soda ash production capacity accounted for about 45% of the world’s total capacity, while its output accounted for around 42% of the world’s total production. 　　(II) Consumption Trends In recent years, driven by industries such as real estate and automobiles, the domestic glass industry has experienced rapid development, which in turn has contributed to an increase in the consumption of soda ash. From 2002 to 2012, domestic soda ash consumption increased by an average of 1.3 million tons per year, with an average annual growth rate of 9.2%. Currently, 48% of China’s soda ash production is used in the manufacture of flat glass and household glass, 20% is used to produce inorganic salt products, 5% is used in the production of synthetic laundry detergent, 2% is used for alumina production, 7% is exported, and the remaining 18% is used to produce other industrial products and as inventory. 　　(III) Corporate organizational structure and capacity distribution At present, there are 44 soda ash manufacturing enterprises in China (with 53 production units), accounting for more than half of the total number of soda ash manufacturers in the world. Among them, there are 12 ammonia-alkali enterprises, 31 combined-alkali enterprises, and 1 natural-alkali enterprise. Domestic soda ash manufacturers are generally small in scale, with a high degree of polarization. The largest enterprises have a capacity of 3 million tons per year, while the smallest have a capacity of only 30,000 tons per year; the average capacity is around 650,000 tons per year ； There are 19 enterprises with a production capacity of over 600,000 tons per year, accounting for 79% of the total capacity ； There are 9 enterprises with a production capacity between 300,000 and 600,000 tons per year, accounting for 13% of the total capacity ； There are 16 enterprises with a capacity of less than 300,000 tons per year; they account for only 8% of the total production capacity. Domestic soda ash manufacturers are located in 22 provincial-level administrative regions, covering almost the entire national consumer market. Among them, the top five provinces in terms of soda ash production capacity are Shandong, Jiangsu, Henan, Hebei, and Qinghai, accounting together for 64.6% of the total domestic production capacity. 　　(IV) Status of process equipment There are three methods for producing soda ash in China: the ammonia-soda method, the combined soda method, and the natural soda method. Among them, the ammonia-alkali process is a traditional production method that yields high-quality products with low investment per unit of production capacity; however, it generates large amounts of waste residue that are difficult to handle, requiring long-term storage ； The combined alkali process is a production technique unique to China, offering advantages such as low waste generation and high resource utilization efficiency. However, it requires the construction of ammonia synthesis facilities, which involves significant investment. Moreover, most enterprises using this process were originally small fertilizer plants, and thus suffer from issues such as weak technology and management capabilities, as well as high consumption levels ； The natron method has advantages such as low cost and no pollution, but its production is constrained by the distribution of resources; only one company in China uses this process. 　　Facing the challenging market conditions, the Soda Ash Plant of Shandong Haihua Co., Ltd. took the lead in the industry by adopting centrifugal dehydration technology. On top of its existing filter-press dehydration system, it installed high-tech centrifuges to carry out a secondary centrifugal dehydration process. As a result, the moisture content in soda ash has been reduced from 18% to below 13%. This has led to a savings of 150 kilograms of medium-pressure steam per ton of soda ash produced, thereby achieving remarkable results in terms of energy conservation, consumption reduction, and cost cutting. The image shows employees at the secondary centrifugal dewatering station conducting inspections and maintenance. (Photographed by Zhang Qinye) In recent years, soda ash manufacturers in China have widely adopted new processes, technologies, equipment, and materials, which has led to a significant improvement in the overall technical level of the industry. New processes such as a new process for producing soda ash from transformed gas, a cold-free carbonation process, a process for producing soda ash from melamine exhaust gases, and a process for producing soda ash through a salt-alkali-calcium cycle have been developed ； Advanced energy-saving and emission-reduction technologies with independent intellectual property rights have emerged, such as dry ash addition technology, vacuum distillation technology, ammonia-alkali sludge desulfurization technology, calcium carbide slag-based refined brine technology, centrifuge technology for the secondary filtration of heavy alkalis, and flue gas recovery technology ； Advanced equipment such as 65-square-meter horizontal belt-type soda ash filters, 650-cubic-meter carbon dioxide screw compressors, and powder-flow type soda ash coolers has been developed, driving the soda ash industry toward larger scale, greater automation, and improved efficiency. 　　Problems:
○ Severe overcapacity
○ The proportion of loss-making enterprises continues to rise
○ Waste disposal issues hinder corporate development

Existing problems:
(1) There is severe overcapacity; production clearly exceeds sales.
Before 2008, the utilization rate in the soda ash industry remained above 90%. After 2008, affected by both the financial crisis and rapid expansion of production capacity, the industry’s operating rate dropped by more than 10 percentage points, reaching only 83% in 2012. At present, there is still a large amount of soda ash production capacity under construction or in the planning stage in the country: 11 projects are under construction, with a combined annual production capacity of 6.25 million tons, and it is expected that all of these will be completed and put into operation within the next two years ； There are 10 planned projects, with a production capacity of 7.4 million tons. Without strict regulatory measures, it is estimated that by 2015, the production capacity of soda ash will reach 34.95 million tons or even more, while demand will remain around 25 million tons. This would result in a surplus of 10 million tons, with an operating rate of only 71%, thereby having a severe negative impact on ** and the development of local economies. 　　(II) The extent of losses is increasing, posing a threat to industrial security. Affected by overcapacity and a sluggish market, the losses in the soda ash industry continue to grow. In 2012, 83% of ammonia-soda enterprises incurred losses, with the total loss amounting to 1.974 billion yuan ； 54.8% of caustic soda manufacturers suffered losses, amounting to 1.18 billion yuan. After offsetting gains and losses, the entire industry incurred a total loss of 2 billion yuan. Entering 2013, the market conditions for soda ash still showed no signs of improvement, and the proportion of loss-making enterprises continued to rise. As of June 2013, the soda ash industry had been in the red for 18 consecutive months, with 85% of companies operating at a loss, a 24 percentage point increase compared to 2012. After offsetting gains and losses, the industry’s loss amounted to 1.58 billion yuan. It is estimated that in the second half of the year, the difficult situation will remain unchanged; over time, a large number of soda ash manufacturers will be forced to reduce production or shut down, posing a serious threat to the safety of the soda ash industry. 　　(III) The treatment of waste liquids and residues severely restricts the development of ammonia-soda ash industries. For every ton of soda ash produced by the ammonia-soda ash process, approximately 10 cubic meters of waste liquid and 300 kilograms of waste residue are generated. Currently, most soda ash manufacturers worldwide rely on dumping ammonia-soda waste liquid into the sea for treatment, and on landfilling ammonia-soda waste residue for disposal. As the production and living environments improve, there will be less and less room for ammonia-alkali enterprises to operate in the eastern coastal areas. If they fail to change their development approaches and reduce pollution emissions and waste accumulation, these enterprises will face severe constraints imposed by environmental protection measures. 　　Reasons:
○ Excessive pursuit of economic growth
○ Investment aimed at acquiring resources
○ Overestimation of one’s competitive advantages
○ Inadequate mechanisms for phasing out excess production capacity
○ Lack of systems for monitoring and implementing rewards/punishments

Analysis of the reasons:
(1) Excessive pursuit of economic growth
In order to boost GDP and employment, some local **departments use their administrative power to interfere in corporate investment decisions, resulting in the launch of projects that lack essential elements such as resources, energy, and markets ； In some places, the \"Guidelines for Industrial Structure Adjustment\" and the \"Access Requirements for the Soda Ash Industry\" have not been strictly enforced, resulting in projects that do not meet the requirements of industrial policies successfully passing the approval procedures and environmental impact assessments. 　　(II) Some enterprises aim to acquire resources. Many enterprises comply with local regulations that state that in order to obtain resources, it is necessary to build large-scale projects locally, and they invest there with the goal of securing such resources. After 2007, many soda ash projects aimed to acquire resources such as coal mines, salt mines, and salt lakes in order to achieve greater long-term benefits. 　　(III) Some enterprises overestimate their competitive advantages. Enterprises in the eastern region believe that they are close to the market, ignoring issues such as high energy prices and high financial costs ； Western companies place too much emphasis on resource and cost advantages, ignoring issues such as long distances to markets, high transportation and sales costs, and limited shipping capacity. Newly established companies believe that they possess resources, a large scale, and advanced equipment and technology, giving them a strong competitive edge. Although established companies have lower financial costs, are located closer to the markets, and enjoy inherent advantages, it remains to be seen who will emerge victorious in this fierce market competition. They are all full of confidence in their ability to survive in market competition: “If anyone is going to fail, it certainly won’t be me.” ” 　　(IV) Incomplete capacity withdrawal mechanisms: First, local authorities are reluctant to see enterprises withdraw in order to maintain GDP, tax revenues, and employment ； Second, in order to avoid responsibilities related to bad debts and uncollectible debts, banks try their best to prevent companies from withdrawing ； Thirdly, there are many difficulties such as employee placement, and no policy support is available; companies do not want to nor are they able to withdraw unless it is absolutely necessary. 　　(5) **The competent authorities lack means for inspection and enforcement of penalties/rewards.** Industrial policies such as the \"Guidance Catalogue for Industrial Structure Adjustment\" and the \"Access Requirements for the Soda Ash Industry\" issued by the National Development and Reform Commission and the Ministry of Industry and Information Technology are highly targeted, with clear and specific requirements; if properly implemented, they can achieve immediate results in curbing uncontrolled expansion in the industry and phasing out outdated production capacities. However, despite the existence of good policies, supervision has not been properly implemented, resulting in a significant reduction in the effectiveness of these policies. 　　Suggestions:
○ No new projects should be approved within five years.
○ Implement a system of approval requirements for enterprises entering the industry.
○ Establish a mechanism for companies to withdraw from the industry.
○ Consider carefully the balance between delegating authority and maintaining oversight.
○ Guide enterprises to carry out restructuring and integration.

Industry suggestions:
(1) It is recommended that no new soda ash production projects be approved or registered within five years. In line with the relevant requirements set out in the \"Guidelines for Industrial Structure Adjustment\" and the \"Access Requirements for the Soda Ash Industry\", banks should refuse to provide loans for such new projects. 　　(II) Implementation of access announcement management for soda ash enterprises 　　Due to the unclear status of the \"Access Requirements for the Soda Ash Industry\" within industrial policies, local authorities lack the necessary enforcement capacity; in some cases, they even adopt a passive attitude or protect enterprises that violate regulations. Therefore, it is recommended to bring soda ash enterprises under announcement management in order to implement the \"Access Requirements for the Soda Ash Industry\" and address the issue of overcapacity. 　　(III) Implement the existing regulations, establish an exit mechanism, and accelerate the phasing out of outdated production capacity. Conduct inspections of soda ash manufacturers in terms of energy consumption, environmental protection, and quality. In accordance with the \"Access Requirements for the Soda Ash Industry,\" the \"Clean Production Standards for the Soda Ash Industry,\" and the \"Energy Consumption Limits per Unit of Product in the Soda Ash Industry,\" those manufacturers that do not meet these requirements should be encouraged to withdraw from the industry through methods such as capacity replacement or purchase, thereby accelerating the elimination of outdated production capacity. 　　(IV) Comprehensive consideration of delegation of powers and regulatory functions In the absence of adequate supervision, it is recommended that **the relevant departments integrate the delegation of authority for environmental impact assessments and project approvals for new soda ash projects with effective supervision, in order to prevent further deterioration of the overcapacity situation. 　　(5) Guiding enterprises to carry out restructuring and integration Enterprise restructuring and integration offer multiple advantages. It not only facilitates centralized procurement and enhances bargaining power over purchase prices, but also helps optimize processes such as sales and transportation, thereby saving costs. More importantly, it is possible to optimize outdated production capacity through restructuring and integration, while reducing unnecessary fierce competition. Given the overall surplus in the soda ash industry and the difficulties faced by enterprises, it is recommended to **introduce relevant policies to encourage and guide enterprises to carry out mergers and reorganizations. (Department of Industrial Development, China Petroleum and Chemical Industry Federation; China Soda Ash Industry Association)