Report on the work summary for the first half of the year and key priorities for the second half of the year by the China Soda Ash Industry Association

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Report on the Summary of Work Completed in the First Half of the Year and Key Tasks for the Second Half by the China Soda Ash Industry Association – Wang Xiling, August 15, 2007, Dalian. Distinguished executive directors: On behalf of the association’s secretariat, I would like to present a report on the work carried out by the association during the first half of the year, as well as the key tasks for the second half. Please review this report and offer your feedback and guidance. Part I: Work Done in the First Half of the Year
I. Various types of meetings were held in response to industry needs:
1. The first information release meeting in 2007 was held: In January 2007, the first information release meeting took place in Beijing. Various market-related pieces of information for the year 2006 were released, such as national soda ash production data, import and export statistics for soda ash, and output figures for major downstream products. Additionally, information analyzing the development trends in 2007 was also provided, serving as a reference for soda ash enterprises when assessing the market situation and making decisions. It laid the foundation for stable and rational development in 2007. 2. The 2007 Member Conference of the China Soda Ash Industry Association was held: In late March this year, the 2007 Member Conference was held in Yichang, Hubei. President Di Tongli delivered a report on the production and operation conditions of the soda ash industry in 2006 as well as the development trends for 2007. Secretary-General Wang Xiling presented a work report on behalf of the fifth governing council. Vice President Xie Duque gave a report explaining the amendments to the association’s articles of association, while Vice President Xing Xuepu provided an explanation regarding the adjustments to the membership fees. Director Cheng Lin reported on the financial revenues and expenditures of the association. The conference reviewed the above reports, elected the sixth council, executive council, vice presidents, and president through secret ballot, determined the structure of the association’s administrative bodies, appointed the deputy secretary-general and heads of various departments, and admitted new members. After the meeting, the Secretariat issued certificates to the new members, and published a special issue of the first session of the 6th council of the China Soda Ash Industry Association. In accordance with the procedures, the statutes as well as the names of the president and vice presidents were submitted for approval to the China Petroleum and Chemical Industry Association and the State-owned Assets Supervision and Administration Commission of the State Council, while the membership fees were submitted for approval to the Ministry of Civil Affairs and the Ministry of Finance. 3. A meeting of the entire Technical Advisory Department was held: This year, the sixth session of the Technical Advisory Department of the China Soda Ash Industry Association was established. In order to implement the principles of energy conservation and emission reduction, and to identify key areas for addressing these issues in the soda ash industry, the first meeting of the sixth session of this department was held in Yanji in late June. During this meeting, discussions and analyses were conducted on the energy consumption problems and environmental protection challenges faced by the soda ash industry ； Opinions were exchanged on the \"Statistical Methods for Economic and Technical Indicators in Soda Ash Production\" ； The prospects of ammonium chloride were analyzed. 4. A symposium was held for export-oriented enterprises: In May this year, upon learning that the tax rebate for soda ash exports might be abolished, the association promptly reported the situation to the **Development and Reform Commission and the Ministry of Commerce through the China Petroleum and Chemical Industry Association, requesting that the tax rebate be reduced to 5% on a temporary basis. In June, when it became clear that such a temporary solution was unlikely, an immediate symposium was convened with 11 companies engaged in export activities to analyze the impacts of the abolition of the tax rebate, as well as the supply and demand dynamics of soda ash in the international market. In particular, it was examined whether the United States might increase its output of natural soda ash in the international market within half a year, and the possibilities of price increases and their potential consequences were analyzed. Proactively engage with users, make decisive decisions, and minimize losses. 5. A professional conference on calcium chloride was held: In early July this year, a professional conference on calcium chloride was convened in Qingdao. In addition to companies that produce calcium chloride as part of the soda ash industry, companies of a certain scale from outside this industry were also invited to attend. Together, they discussed and analyzed the reasons for the current weakness in the calcium chloride market as well as potential strategies to address it, and made plans for efforts to create well-known brand products in China. 6. The second information release meeting for 2007 was held: At the end of July, the second information release meeting was held in Xining, where various market-related updates for the first half of the year were presented, as well as information on market conditions in different regions across the country. Information on the factors that contributed to rapid growth during the first half of the year was provided, along with analyses of future development trends and guidelines regarding the strategies that should be adopted. The comrades present felt more confident, with greater assurance that they would be able to navigate 2007 successfully. II. Participation in the 2007 World Soda Ash Conference as a group: From June 11 to 21, 2007, at the invitation of the European Chemical Industry Association sowie Grozny Separation Technologies France SARL and Grozny Separation Technologies Germany GmbH, the China Soda Ash Industry Association organized a Chinese delegation of 22 members, comprising 16 domestic soda ash manufacturers and one design and research institute, to attend the 2007 World Soda Ash Conference held in Nice, France. Following the conference, the delegation visited Grozny Separation Technologies company in France. Those who attended the World Soda Ash Conference included representatives from the soda ash associations of China, Europe, and India, as well as representatives from large soda ash manufacturing companies around the world ； Representatives of companies that provide technical services, equipment, consulting, and legal services to soda ash manufacturers ； A total of 169 representatives from downstream enterprises of soda ash products attended the conference; the Chinese delegation was the largest delegation at the conference. A total of 21 representatives from different ** gave speeches at the conference. The Chinese delegation had 4 speakers at the conference, making it the delegation with the most speeches. The speeches at the conference focused on how soda ash enterprises can survive and develop from aspects such as law, services, energy conservation, and environmental protection. The main takeaways are as follows: From the conference papers presented by foreign companies, it is evident that, first, they have a stronger sense of lawfulness; they adhere to the law in every aspect, voluntarily and proactively applying it, without avoiding it or trying to find loopholes in the law. Worth learning from*. Second, their sense of service is stronger than ours. Be able to view and handle cooperative relationships in a dialectical manner, and proactively provide users with various thoughtful services. By handling economic interests with strategic thinking, enterprises can maintain their vitality for decades or even centuries. Worth learning from*. Third, their environmental awareness is stronger than ours. Foreign companies advocate responsibility and care, regarding environmental protection as a responsibility and obligation; they proactively comply with environmental laws and address environmental issues. Worth learning from*. Following the World Soda Ash Congress, we visited the world-renowned Grozny Separation Technologies Company. Our main focus was on centrifuges. Traditionally, there are certain requirements regarding both the centrifuge itself and the solid-liquid ratio of the feed material; a low solid-liquid ratio can adversely affect the normal operation of centrifuges. Therefore, a thickener is usually installed prior to the centrifuge. Fortunately, this time we saw a decanter centrifuge, which combines the functions of thickening and separation into one unit. If the average crystal size of our soda ash can reach over 100 microns, it may be possible to use this decanter centrifuge for single-stage separation—directly feeding the carbonation effluent into it instead of using a vacuum filter. This would significantly reduce the moisture content in the sodium bicarbonate, thereby saving a great deal of steam during the calcination process. It is hoped that domestic design and research institutions, soda ash manufacturers, and Grozny’s general agent in China, **Bihua International Co., Ltd.,** will work together to conduct thorough research and testing on this topic, striving to achieve breakthroughs. III. In accordance with the requirements, carry out the basic work related to energy conservation and emission reduction: 1. Calculation of production and emission coefficients in the soda ash industry: One of the core tasks in the national pollution source census is the calculation of production and emission coefficients. This task is crucial in determining whether the results of the census are scientific and effective. Entrusted by the Office for the Census Work, the Chinese Research Academy of Environmental Sciences took the lead in establishing a national project team on the calculation of emission and discharge coefficients for industrial pollution sources, comprising 22 units. Among them, the China Petroleum and Chemical Industry Federation was entrusted with the task of calculating such coefficients for the chemical industry. Commissioned by the China Petroleum and Chemical Industry Association, 13 associations including the China Soda Ash Industry Association took on the task of calculating the emission and discharge coefficients for 13 different industries. In accordance with the requirements of the project team responsible for calculating the emission and discharge coefficients for industrial pollution sources across the country, we prepared an \"Implementation Plan for the Calculation of Emission and Discharge Coefficients in the soda ash industry.\" In June, the first kick-off meeting for this project was held as part of the national pollution source survey; at that meeting, the objectives and significance of the survey were explained ； The implementation plan was discussed, and training was provided on the contents of the project ； The work tasks have been arranged. The 12 soda ash companies currently involved in the project to calculate the emission and discharge coefficients for this industry are gradually submitting their data. The Soda Ash Association is discussing each set of data with the company officials to ensure that the calculation of these coefficients is carried out properly. To achieve the goal set out in the Outline of the 11th Five-Year Plan for National Economic and Social Development of reducing the total emissions of major pollutants by 10%, the State Council has decided to conduct the first national census of pollution sources starting from January 1, 2008. We are hereby informing you in advance of the contents of the industrial source survey (the six items below), so please make the necessary arrangements and preparations ahead of time. ①The basic registration information of the enterprise and other relevant details, including information on the enterprise’s waste discharge outlets and the destination of the discharged wastewater ； ②Raw material consumption, including water usage and volume, the composition and consumption of energy sources (coal, oil, electricity, gas, etc.), the sulfur content in fuels, and the consumption of highly toxic and harmful raw materials and auxiliary materials ； ③Production details, including the types and output of the company’s main products ； ④Information on facilities that cause pollution, including boilers and furnaces that emit air pollutants, as well as facilities that generate wastewater and solid waste; plus the types, numbers, and scale of these facilities ； ⑤The generation, treatment, emission, and comprehensive utilization of various pollutants, as well as the construction, operation, and investment in various pollution control facilities ； ⑥Monitoring of pollutant emissions, including monitoring locations, times, and frequencies, as well as types of pollutants, emission concentrations, and emission volumes. 2. Work on the clean production standards for the soda ash industry and the guidelines for their development: The **Development and Reform Commission requested the formulation of a \"clean production evaluation index system for the soda ash industry\"; after seeking opinions from various enterprises, the association prepared this system and submitted it. On July 14, 2007, the **Development and Reform Commission issued Announcement No. 41 of 2007 to publish these standards, which came into effect as of the date of publication. “ **The Environmental Protection Administration has requested the development of \"clean production standards for the soda ash industry\" along with explanatory documents. The basic principle of these clean production standards is to reflect the concept of pollution prevention throughout the entire production process, covering all stages from the selection of raw materials to the production process and the disposal of products. Determine the baseline value grades for each indicator based on its scope of application ； When setting the benchmark values, the existing technical levels and management standards at home and abroad should be taken into account, their relativity should be considered, and there should be a certain incentive effect. The indicators include ammonia alkali, double alkali, and natural alkali, based on the indicators for resource and energy utilization ； Product quality indicators ； Equipment requirements ； Indicators for wastewater and pollutants discharged ； Comprehensive utilization index ； Environmental management requires six aspects, which are evaluated at three levels: Level 1 indicator: Reaching the advanced level of clean production in the international industry. This indicator is primarily used as a reference during clean production audits, to identify gaps through comparison and thereby uncover opportunities for clean production. Secondary requirement: Reach the advanced level of the domestic industry. Level 3 requirement: Reaching the general domestic level of clean production, that is, the basic requirement. After extensive consultation with enterprises, the \"Clean Production Standards for the Soda Ash Industry\" along with the relevant preparation notes have been completed and submitted to the **Ministry of Environmental Protection**. 3. Clarify the statistical definitions in the soda ash industry: Due to differences in understanding and interpretation of statistical methods among various enterprises, the scope covered varies, resulting in poor comparability of statistical figures. Therefore, based on the feedback from enterprises and discussions at the full meeting of the association’s technical advisory department, the China Soda Ash Industry Association issued official guidelines to clarify and define the items that are subject to controversy or lack clarity in statistics, thereby improving the comparability of such figures. The clearly defined items are: (1) Soda used by enterprises for their own purposes is included in the soda ash production volume. (2) The energy consumption of self-provided power stations is not included in the calculation of soda ash energy consumption. (3). Calculate the energy consumption of light soda ash and heavy soda ash separately. The energy consumption for heavy soda ash should include the energy consumption of light soda ash and the additional energy consumption incurred in producing heavy soda ash from light soda ash. (4). When calculating the energy consumption for producing hydrazine bisulfate, it is necessary to specify whether the ammonium chloride used is dry ammonium or wet ammonium. For soda ash plants that produce both dry ammonium and wet ammonium, it is necessary to calculate separately the energy consumption per two tons for the production of dry ammonium and that for the production of wet ammonium. The energy consumption per two tons for producing dry ammonium should include the energy consumption required for producing wet ammonium, as well as the additional energy consumption associated with converting wet ammonium into dry ammonium ； (5) In cases where the soda ash system does not have a separately established water intake system and circulating water system, the energy consumption associated with this portion shall be reasonably allocated between soda ash and other products based on their actual water usage. (6). For integrated soda ash plants utilizing the Hou’s process for soda ash production, the energy consumption of the ammonia synthesis decarburization process shall be included in the energy consumption of ammonia synthesis, and shall not be counted as part of the energy consumption for soda ash production. The energy consumption of the low-pressure compressor used to transport carbon dioxide to the soda ash plant is included in the energy consumption of the soda ash plant. (7) For integrated soda ash plants that use shifted gas for soda ash production, the energy consumption of compressors is included in the energy consumption for ammonia synthesis, and is not counted as part of the energy consumption for integrated soda ash production. The energy consumption of the booster pump installed in front of or behind the caustic soda carbonization tower is included in the caustic soda production energy consumption. IV. Key priorities for the Association in the second half of the year: 1. Continue to do a good job in market-oriented research, information dissemination, and guidance. 2. Focus on energy conservation and emission reduction to hold a successful technical annual conference in 2007. 3. Hold a special seminar on ammonium chloride. 4. Prepare for the re-evaluation of Ammonium Chloride as a Chinese famous brand. 5. Make preparations for calcium chloride to participate in the evaluation for China’s famous brand status. V. Review of the market in the first half of the year: The domestic soda ash market in the first half of the year can be briefly summarized in three sentences. Supply and demand in the market are basically balanced, with a slight shortage of supply. The market is developing steadily, with prices rising gradually. The benefits are better than in previous years. The first sentence should be interpreted as indicating that in the first half of this year, the production of soda ash increased at a steady and normal pace; demand was slightly higher than the increase in production, resulting in a generally tight supply situation across the country, with significant shortages in certain areas and at certain times. This is mainly driven by flat glass, household glass, and the chemical industry (especially nitrate and cyanate). In 2007, there were over 20 glass production lines that had been built or were under construction, with a production capacity of around 70 million metric tons. Together with the significant increase in exports, it is estimated that in the first half of this year, the demand for soda ash resulting from the increased production of flat glass compared to the same period last year will exceed 400,000 tons. The production of household glass and its products has surged, with an increase far exceeding that of previous years. This is mainly due to the conversion of bottles for specific uses, changes in bottle designs, as well as an increase in exports of wine bottles and beer bottles. Based on estimates of this increased production, the consumption of soda ash in the first half of the year will exceed 300,000 tons compared to the same period last year. This year, there has been a severe shortage in the dinitro and nitroaniline markets, leading to soaring prices; (the market prices for both dinitro and nitroaniline have exceeded 3,000 yuan per ton), which in turn has prompted an increase in production. These factors together drive the soda ash market. The second sentence should be interpreted as follows: since the beginning of the year, the development of the soda ash market has been steady, normal, and rational; as supply and demand conditions changed, prices rose gradually and steadily, without disrupting this stable pattern. The third sentence should be interpreted as meaning that costs have decreased and efficiency has increased. Mainly because the price of salt is lower than in previous years, while the average price of soda ash is higher, so the profitability is naturally better than in previous years. At the same time, two old problems remain: one is the price disparity within the same region, and the other is the price disparity between regions. Although imports were more than 1,000 tons higher in the first half of the year compared to the same period last year, this is a normal phenomenon. Exports were reduced by over 10,000 tons; this was mainly due to some companies with low export volumes producing even less because of tight conditions in the domestic market, while the major export-oriented companies continued to operate as planned. VI. Analysis of market development trends in the second half of the year: In the second half of the year, a basic balance between supply and demand will continue to prevail; supply will be relatively tight, prices will move steadily upward, with an increase that will be smaller than that seen in the first half of the year. The price gap between the same region and different regions will continue to narrow. We can conduct arguments and analyses from the following three aspects: 1. Analysis from the perspective of soda ash production: There are two factors contributing to an increase in production in the second half of the year; one is that the renovation and expansion projects of some enterprises will be integrated into the production system during the major maintenance period, resulting in an increase in soda ash production in the fourth quarter. Secondly, the 600,000 tons per year soda ash plant newly built by Yihua in Wanzhou will begin trial operation in October, and soda ash production from it will be available on the market for at least a month. One factor contributing to the production decline in the second half of the year is the fact that more than two-thirds of companies conduct their annual major maintenance during this period, which leads to a natural and *inherent decrease in production. Based on a comprehensive analysis, the production of soda ash in the second half of the year will be slightly higher than that in the first half, with the increase being limited; its impact on the market can be disregarded. 2. From an import and export perspective, the positive factor is the strong demand in international markets. Although the United States has some capacity for production suspension, it does not dare to activate this capacity without thorough evaluation, and therefore it will not be able to increase its supply to international markets significantly in the short term (in the second half of this year). In China, there is also a demand that exceeds supply, and it is not possible to increase shipments to international markets. The disadvantage is that, starting from July 1st, **the export tax rebate for soda ash was abolished, resulting in a loss of nearly $20 per ton for exported soda ash. At the same time, taking advantage of the current strong demand in the international market and the fact that neither China nor the United States is able to increase their exports to this market, we worked with our customers in advance and raised the FOB price of exported soda ash in July; thereby covering some of the negative effects at the cost of our reputation. Therefore, exports in the second half of the year are expected to be slightly higher than those in the first half. From an import perspective, the soda ash imported by China is all heavy-grade soda ash from the United States. There is a large market available internationally, and even the U.S. cannot meet that demand; therefore, it has no reason to take the huge risk of offending China by increasing its exports to that country. Additionally, the United States operates on a strict production-based approach according to sales volume; therefore, in the second half of the year, production will proceed in accordance with normal contracts, and import volumes will be higher than those in the first half. The overall volume is expected to be similar to or lower than that of last year. Based on a comprehensive analysis, exports of soda ash are expected to be on par with or slightly higher than last year, while imports of soda ash are expected to be on par with or slightly lower than last year. Net exports will be higher than last year. The impact of imports and exports on the domestic market can also be ignored. 3. From the perspective of domestic consumption: In the first half of the year, the average GDP growth rate across the country reached 11.2%. The growth rates of soda ash’s main downstream products, as well as related products, were all higher than this average level; in particular, flat glass, household glass and its products, sodium nitrite, and sodium nitrate experienced even greater growth rates, which contributed to the strong development of the soda ash market. For example: (1) The situation for flat glass in the first half of the year was good, with two positive factors at play. One of these was the boost from exports to Russia; in recent years, demand for glass in Russia has risen sharply, with demand increasing by 36% in 2006 compared to 2005. Between 20% and 50% of the glass used in the Russian market relies on imports. It created export opportunities for China’s flat glass industry. In the first half of the year, Shandong’s glass export volume increased by 42% compared to the same period last year. Therefore, flat glass, which is already on the fast track of growth, will not and cannot brake suddenly, in line with general trends and inertia. Moreover, the price of flat glass remained stable or increased during the first half of the year, with the increase ranging from 10% to 25%. Third, the prices of oil and other raw materials have fallen, reducing production costs. This is an excellent opportunity for the flat glass industry to achieve profits, and it is believed that the growth rate in the second half of the year will not be lower than that in the first half. While being optimistic, it is also important to note that there is still a considerable amount of product inventory in the first half of the year, and exports have repeatedly faced trade barriers from countries such as India, Australia, the Philippines, and South Korea. (2) The relatively high growth rate of household glass and its products is attributed to three main factors. First, beer companies have started using their own specialized bottles instead of the previously used recycled beer bottles, which could be used by any manufacturer. Starting last year, some large companies began to adopt their own proprietary bottles, as a result of which the production of beer bottles increased sharply. Secondly, the bottle format of beer was changed, with large bottles being replaced by smaller ones; the large bottles were phased out and smaller bottles were produced in larger quantities, resulting in a sharp increase in output. Third is exports; the export volume of beer bottles and wine bottles has increased. Based on a comprehensive analysis, it will take at least 2 to 3 years, or even longer, to switch to specialized bottles and new bottle designs; therefore, high growth rates will continue in the second half of the year. Once exports start to pick up, they will only increase and not decline. Therefore, the daily-use glass and its products will also experience normal growth in the second half of the year at an increase rate not lower than that in the first half. (3) Driven by the demand from dyes and pigments, as well as the pharmaceutical industry, there has been an increase in the production of sodium nitrite; while rising demand from the glass manufacturing, firecracker, and fireworks industries, along with the steel industry, has led to an increase in the production of sodium nitrate. The ex-factory prices of Niuna and Yana produced by Dahuahua Group both exceed 3,000 yuan per ton. It hasn’t been this popular in over two years; this positive factor is on the rise and will continue to develop in the second half of the year. Based on a comprehensive analysis, the consumption level of soda ash in China in the second half of the year is also unlikely to be lower than that in the first half. Based on the above analysis, the increase in production in the second half of the year will be modest, and it will only become apparent in November or later. Imports and exports will remain at similar levels to those of last year. The increase in domestic soda ash consumption is sufficient to offset the rise in soda ash production; thus, the market will remain in a state of basic supply-demand balance, with a slight shortage in supply. If one approaches the market with a calm and rational mindset, 2007 can be passed through smoothly and satisfactorily. Otherwise, subtle changes may occur after November, directly affecting the first quarter of 2008. VII. Information on ammonium chloride: In the first half of the year, the ammonium chloride market remained stable, with supply and demand in balance (there was little inventory, nor was there a severe shortage); prices increased steadily, performing better than last year but worse than in previous years. After June, compound fertilizers began to be produced at full capacity to prepare for the peak season. Additionally, the 45% nitrogen compound fertilizer has seen progress as a result of technical improvements; previously, ammonium chloride could not be used and only urea was available, but after these improvements, ammonium chloride can be used entirely without any need for urea. (It is understood that one-third of the large manufacturers already use this technology.) The supply of ammonium chloride is becoming increasingly scarce, and its price has also risen significantly. The market conditions for ammonium chloride in July are as follows: the ex-factory price of wet ammonium in Henan is 550–580 yuan per ton, while the ex-factory price of dry ammonium is 650–680 yuan per ton. The ex-plant price of wet ammonium in Hebei is 620–650 yuan per ton, while the cost for delivery to Shandong is 620 yuan per ton. The ex-plant price of wet ammonium in the East China region is 580–600 yuan per ton, while the ex-plant price of dry ammonium is 690 yuan per ton. In the Shandong region, the ex-factory price of wet ammonium is 600 yuan per ton; when transported to Linyi, it costs 620 yuan per ton. The ex-plant price of dry ammonium in the southwest region is 625 yuan per ton. The ex-works price of wet ammonium is 550 yuan per ton. The ex-plant price for dry ammonium in the Central and Southern regions is 670 yuan per ton, while the ex-plant price for wet ammonium is 540–550 yuan per ton. In Fujian Province, the ex-factory price of wet ammonium is 550 yuan per ton, while that of dry ammonium is 700 yuan per ton. Even when the situation is favorable, it is necessary to be prepared for potential challenges. It is essential to take into full account the seasonal patterns of ammonium chloride, maintain a positive attitude, and preserve a price advantage over urea. Secondly, it should be noted that **’s policy is to restrict the export of chemical fertilizers; in addition to removing tax rebates for urea and imposing temporary tariffs on it, temporary tariffs have also been introduced this year on diammonium phosphate and phosphate fertilizers. Thirdly, it should be noted that urea, the most widely used nitrogen fertilizer, is seeing an annual increase of over 5 million tons in terms of physical volume; in the first half of this year alone, its production increased by 3.33 million tons compared to the same period last year. According to reports in the China Chemical Industry News at the beginning of August, there is already a surplus of nearly 6 million tons of urea production capacity in China, and another 4 million tons of capacity will come online in the second half of the year, which will inevitably have a significant impact on ammonium chloride production. Fourth, it should be recognized that ammonium chloride has great potential; (Yihua Wanzhou’s plant with a production capacity of 600,000 tons per year began operations in October) ； 200,000 tons/year plant in Pingdingshan, Henan – commissioning in 2008 ； Wuxi Yiduo Investment and Development Group Co., Ltd. is constructing a facility with an annual capacity of 500,000 tons in two phases at the Xufeng Industrial Park in Xuzhou ； Relocation to Dahuahua, Tianjin, Longshan, Sifang, and Kunshan ； New construction and expansion of old factories, etc ； ) the potential impact it may have.