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Business News/ Markets / Soda ash prices to boost Tata Chemicals' growth

Soda ash prices to boost Tata Chemicals' growth

Commencing operations in 1944, Tata Chemicals has come a long way to become one of the top five players in the global soda ash market.

Soda ash prices to boost Tata Chemicals' growthPremium
Soda ash prices to boost Tata Chemicals' growth

Commencing operations in 1944, Tata Chemicals has come a long way to become one of the top five players in the global soda ash market.

Under basic chemicals, the company offers soda ash, sodium bicarbonate, cement, salt, marine chemicals and crushed refined soda. Speciality chemical consists of solutions towards agro chemicals through Rallis and other specialty solutions such as nutritional products and HDS. Basic chemicals form 75% of overall revenue while the rest comes from speciality products.

Soda Ash - usages in industries

Soda ash is used in a wide range of products, such as powdered detergents, glass manufacturing, soaps, and rechargeable batteries, as well as being used extensively in metallurgical processes, and across the food, cosmetic and pharmaceutical industries. An increasing focus on renewable energy with government initiatives and private sector investment in such sources is strongly driving global demand for soda ash, particularly for flat glass in solar application.

Growth driven by Soda Ash

Demand growth remains strong across all applications. Global soda ash supply remained tight with all plants running at high operating rates. Limited capacity addition expected in the near to medium term. Energy and other input costs continue to be elevated. Realisations largely driven by market dynamics and input costs. Soda ash price hike taken to the tune of 2000/tonne in April 2022.

Demand for Soda Ash is expected to stay robust over the next 18 months. There are no additional capacities coming in from China and Soda Ash capacity of 1MT has been shut down recently in China. Natural Soda Ash capacity is expected to be commissioned over the next 24-36 months in Mongolia.

Soda Ash graph
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Soda Ash graph (trading economics)

Capacity expansion by Tata Chemicals

Company has incurred a capex of INR13b in FY22, with INR5.8b spent on its India operations. The management aims to incur a similar level of capex in FY23, with an additional INR20b being deployed under Phase II of the expansion. The latter will be completed within five years, with Soda Ash/Sodium Bicarbonate capacity being enhanced by 30% - 40% and silica capex by 5x to 10,000mtpa.

TCL Soda Ash: Market Application
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TCL Soda Ash: Market Application

• Diversified end customer segment mix for TCL.

• Glass remains the largest segment in US and Kenya units

• Detergents is the largest segment in India

Higher soda ash realisations aid better performance

Basic chemical topline performance

Revenues were up 37% YoY to 2901.8 crore. The India business reported growth of 31.8% YoY to 1062.8 crore while the same from North America, UK and Magadi was up 35.3% YoY, 50.4% YoY & 48.7% YoY to 1092 crore, 576 crore & 171 crore, respectively.

The growth across geographies was largely driven by higher realisation owing to a revival in the demand of the end user industry. Basic chemical operational performance: EBITDA for the segment increased 137% YoY to 661.5 crore, largely on the back of better margins from North America and Magadi businesses. EBITDA/tonne for North America and Magadi remained at 4472 (+302% YoY) & 8000 (+172% YoY), respectively.

Around 30% growth in soda ash and 70,000 tons of bicarb, and silica company is now moving to implement a project in 2 phases, which will increase the current capacity about 5x (from 10,000 tons to 50,000 tons) to be done in two streaks of 25,000 tons each.

In Q4FY22, there was good cash generation in Kenya. Also, some debts in Q4 were prepaid. The company earmarked a capex of Rs. 2,000cr for expanding capacities further in India.

Q4FY22 update

Revenues for the quarter was 32% more than previous year and PAT has moved from Rs 29 crore last year to Rs. 470 crores in the current quarter. For the full year, the revenue is 24% more than previous year and for the full year. PAT is Rs. 1,400 crores as against Rs. 436 crore the previous year.

Improved performance is mainly because of the increasing volumes in the US, led by soda ash across geographies and price movement due to absorption of the higher input cost and market dynamics. For the India business, revenue was up 33% compared to previous year and the EBITDA margin has grown by 5% to 24.8% for the current quarter.

What leads to the demand for expansion?

Especially on silica, where the company plans to go from 10,000 tons to 50,000 tons so this is due to customer approvals on hand, which is where they are moving strongly. So, the consuming industry is the glass industry for solar, tyres and food grade and are very clear that they need this product. In fact, the company has got further variants of the product. The various grades of this product are prequalified. So, because of strong pull, the company is just moving forward because this is something which is in line with the sustainability commitment of those sectors broadly.

Growth Triggers

• Improvement in the soda ash pricing environment augurs well for future growth outlook.

• Export demand for North America units to sustain group performance.

• Higher share of speciality business to command better valuations for the overall group


Shuchi Nahar is a Certified Research Analyst. She can be found on Twitter at @shuchi_nahar 

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Published: 16 May 2022, 07:40 AM IST
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