Demand slump washes out soda ash makers’ margins

Ahmedabad: After peaking in 2022 due to high energy costs, the prices of soda ash have fallen by about 18% since January this year. Revenues of soda ash manufacturers have thus been adversely affected in first quarter of the financial year. While GHCL posted an 11% decline in its standalone revenue in Q1 of FY 2024, Tata Chemicals saw its revenue drop by 7.3%. Industry experts say soda ash prices are currently hovering around Rs 30,000 a tonne, from a peak price of Rs 37,000 per tonne in December 2022. Low demand in the global and domestic markets and the emergence of fresh supply chains from China have softened domestic prices, industry players say. Gujarat is home to key soda ash manufacturers such as Tata Chemicals, Nirma, GHCL and RSPL. On the company’s quarterly results, MD and CEO of Tata Chemicals Ltd R Mukundan, said, “Soda ash prices were adversely impacted as many customers delayed purchasing decisions due to new supplies expected from Inner Mongolia, China. This was further affected by the slower growth of the Chinese economy post-Covid and softening of industrial production in developed economies. This may persist in the near term. The company had to adopt agile pricing to maximize volumes and ensure optimum utilization of capacity.” Industry players say there was subdued demand from various domestic end-user segments in the quarter. “The decline in prices is mainly driven by falling demand in the global and domestic markets. This is especially true for the glass and automobile segments. Seasonal declines in the detergent segment also affected demand. On the other hand, fresh supplies from China forced Indian manufacturers to slash prices,” said a senior office bearer of the Indian Salt Manufacturers’ Association (ISMA). In the long term, industry players are bullish about rise in domestic demand.“Prices have fallen due to oversupply and shrinking demand. India’s green energy strides including the push for solar power adoption and electric vehicles will provide a thrust to soda ash manufacturers. Soda ash has applications in the manufacturing of lithium ion batteries and solar glass,” said R S Jalan, managing director, GHCL.