Raw salt: capacity expansion to change the market

In recent years, the two major alkali industries have experienced a surge in capacity expansion, which has driven the rapid growth of domestic crude salt production. By 2007, the shortage of raw salt in the domestic market had eased, but overcapacity emerged in certain regions. This led to effective industry restructuring, with new capacities primarily focused on saline-alkali joint projects. The construction of salt and chlor-alkali integrated facilities accelerated significantly, leading to a more balanced industry layout. As a result, the share of mineral and lake salt gradually increased. In 2008, crude salt production continued its upward trend from the previous year, but an oversupply situation was expected later in the year, which could lead to a decline in domestic crude salt prices. In 2007, China’s raw salt production capacity and output both grew rapidly. Due to favorable weather conditions, sea salt production in northern regions remained high, while well and mineral salt production maintained a growth rate of over 10%. Additionally, the two alkali industries invested in building their own salt fields, further boosting industry capacity. According to calculations based on domestic production and import-export data, raw salt consumption in 2007 reached approximately 61.2 million tons, marking an 8.3% increase compared to the previous year. However, the rapid rise in production caused a continuous drop in domestic salt prices. Domestic chlor-alkali and soda ash production capacity and output also saw strong growth in 2007. In 2008, the government intensified its control over “two high and one resource” projects. Both chlor-alkali and soda ash are energy-intensive, and chlor-alkali-supported PVC is a resource-consuming project. As a result, except for ongoing projects, some large-scale alkali projects were delayed or canceled, especially those originally planned for construction. It is estimated that the growth rate of production capacity and output for chlor-alkali and soda ash will slow down in 2008. Moreover, many new large-scale chlor-alkali projects in regions like Jiangsu, Shandong, and Inner Mongolia now rely on self-sustained salt sources, reducing the demand for raw salt. With the commissioning of several large chlor-alkali plants and the expansion of some soda ash facilities, the price of domestic crude salt rebounded in the first quarter of 2008. However, by the second half of the year, as crude salt production outpaced the growth of the downstream market, prices began to fall again, leading to oversupply. Despite this, the low profit margins in crude salt production mean the decline won’t be drastic, and the impact of macro-control measures from the two alkali industries will remain significant. Looking ahead, the raw salt market is expected to face excess supply, and the imbalance between salt and alkali industries will become more pronounced. Raw salt prices will likely continue to remain at a low level. To adapt, domestic raw salt companies should focus on the following strategies: First, delay or cancel unnecessary projects. Many regions in China are still planning to build or expand salt production and chlor-alkali or soda ash facilities. With increasing macro-control efforts, the two alkali industries are under closer scrutiny. Relevant departments and enterprises should align with national policies, delay or cancel uncompetitive projects, conserve resources, and avoid market risks. Second, diversify product lines. Most domestic salt is produced in solid form, but liquid salt can save energy, and pipeline transport reduces logistics costs. Therefore, companies should increase the proportion of liquid salt production. They should also develop a range of edible and industrial salts with health benefits to improve quality and add value. Third, extend the industrial chain. Crude salt relies on resources and scale for profitability. To achieve higher added value and sustainable development, companies should accelerate salt-alkali integration, develop the salt chemical industry, and create a full industrial chain from raw salt to chlor-alkali and fine chemicals. Particularly, they should invest in high-value intermediates and specialty chemicals to establish an integrated development model across the entire supply chain.

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