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January, 1999

China Soda Ash Producers Seek New Exporting Strategies

    Hit hard by a slack domestic market and intensified price wars, soda-ash producers in China are mulling seeking viability through unified exports.

    "Unity is power, scattered exports on one's own are useless," said Wang Xiling, deputy secretary-general with the Chinese Soda Ash Industry Association (CSAIA).

    Recently, some 20 member enterprises of CSAIA held a meeting to discuss issues regarding unified soda-ash exports and pricing strategy.

    Soda ash is mainly used in glass production and metallurgy.

    If China exported 1 million tons of soda ash each year, the industry's production capacity would be brought to full play, thereby relieving the pressures of shrinking domestic demand, Wang said.

    But over the past few years, soda ash exports averaged only 400,000 tons each year.

    "Non-package bulk transportation of soda ash will be realized if economies of scale are achieved," Wang said, adding that construction of docks and storage facilities will be made much easier than before.

    In the first 10 months of 1998, total production of soda ash hit 6.14 million tons, up 5 per cent from the same period last year.

    If calculated based on that figure, the total output of soda ash last year should have stood at 7.3 million tons, up 150,000 tons from 1997.

    Its actual consumption, however, reached roughly 6.2 million tons, down 400,000 tons from 1997.

    Flagging sales of glass products and iron and steel plants' technical upgrading to bring down production costs both had an adverse impact on the soda-ash market.

    Prices of soda ash dropped by nearly 12 per cent on average compared with 1997.

    Worse, defaults from customers also hurt the industry badly. The debts owed to soda-ash producers have amounted to nearly 5 billion yuan (US$602 million).

    A glut in the domestic market forced the enterprises to resort to exports.

    But they were significantly frustrated by economic and currency crises in Southeast Asia, which was previously the major destination for their products.

    These enterprises had to undercut each other to grab orders from overseas.

To curb the disorderly competition, the CSAIA once urged all the soda-ash enterprises to cut their production scales and implement pricing self-control.

    Some analysts say that unless a unified entity for exports is formed, China's soda-ash producers will not climb out of the doldrums.

    Others argue that massive investment in infrastructure such as extension of railways and the booming housing construction sector will offer a windfall for the industry this year.

source: Chinese Newspaper