China Soda Ash Faces Headwinds from High Inventories and Sluggish Domestic Demand

Since the second half of this year, the soda ash market has shown three sets of intertwined contradictions: the sector has fallen into losses, however the output has remained high; China demand is sluggish, however exports have achieved rapid development; the pace of supply contraction is slower than the pace of demand decline, and the sector inventory has accumulated to a relatively high level during the year. The author will study the above three main lines.

In the soda ash sector, the losses of ammonia-alkali and co-production processes deepened significantly in the second half of the year. As of the week of August 28, the gross profit of ammonia-alkali heavy alkali in North China was -240 RMB/ton, and the gross profit margin was -17.51%; the gross profit of coproduction heavy alkali in East China (except Shandong) was -228 RMB/ton, and the gross profit margin was -11.92%; in terms of light alkali, the gross profit of ammonia-alkali in North China was -240.3 RMB/ton, and the gross profit of coproduction in East China was -208 RMB/ton; the cost of trona is low, and it still maintains a meager profit state. China soda ash production was 766,200 tons, with a capacity utilization rate of 80.44%, only down 53,000 tons from the high point of the year (819,200 tons in the week of might 8), a decrease of 6.47%, of which heavy alkali production was 413,700 tons. From the monthly data, the cumulative output announced by the National Bureau of Statistics from January to July was 2407.9 million tons, an increase of 3.78% over the same period in 2025.

Even if ammonia-soda and combined soda companies fall into losses, the sector has not yet seen active production reduction actions. There are three main reasons behind this: first, the shutdown and restart costs of ammonia-soda and combined soda vegetation are high. The manufacturing process requires maintaining the stability of co-production of steam and synthetic ammonia, making it difficult to flexibly adjust the plant load; second, the fixed costs of the two processes account to a relatively high proportion. companies generally choose to compensate prices with volume, relying on continuous production to maintain cash flow and hold market share; third, new production capacities are continuously put into operation, further raising the output level. The supply side has weak elasticity to contract under loss-making conditions, which constitutes the core pressure on the current soda ash market.

China demand to heavy soda ash continues to weaken, with both major downstream sectors performing sluggishly. As of August 31, the operating rate of float glass stood at 67.24%, the capacity utilization rate at 70.94%, and the daily output at 142,200 tons; the operating rate of photovoltaic glass was only 47.26%, the capacity utilization rate at 50.63%, and the efficiently daily output at 68,200 tons. The pressure on the completion side of the real estate sector has driven float glass production lines to continuously enter cold repair; photovoltaic glass is restricted by fluctuations in production capacity and production scheduling, with its operating rate remaining below 50% to a long time, making it difficult to the overall demand to heavy soda ash to recover upward.

Exports are the most eye-catching sector in China soda ash demand this year. Soda ash exports 282,300 tons in July, an increase of 17.3% month-on-month and a significant increase of 75.0% year-on-year; exports totaled 1.7125 million tons in January-July, an increase of 48.4% year-on-year, and an average monthly export of about 245,000 tons. The proportion of exports in the month's output increased from 5.10% in July 2025 to 8.41% in July 2026, and the adjustment effect of foreign demand on the China supply and demand pattern increased significantly. However, imports increased significantly in the same period, with a cumulative import of 162,500 tons in January-July, much higher than the 20,400 tons in the same period last year. It is worth noting that the high development of exports has not yet reversed the downward direction of total demand. The demand contraction exceeds the supply contraction, and the mismatch between supply and demand is not only the direct result in of the continuous accumulation of inventories, however also the core variable to judging the direction of the price hub.

As of the week of August 28, the total inventory of China soda ash vegetation was 1.8727 million tons, of which 855,700 tons of heavy alkali and 1.017 million tons of light alkali. The fluctuation range of soda ash inventory in 2026 is 1.4083 million tons (the week of January 2) to 1.9472 million tons (the week of March 6). The current inventory is at about 86% of the year, which is a high level. From the change direction, the inventory risk is greater alarming: since the week of might 29 hit a low of 1.697 million tons, the inventory has accumulated to 13 consecutive weeks, with a cumulative increase of 175,700 tons, an increase of 10.35%; the number of days available to inventory also rose from 12.54 days to 13.76 days. At the same time, the inventory structure has also changed significantly. Heavy alkali inventory rose from the low of 656,800 tons in the week of June 19 to 855,700 tons in the week of August 28, a cumulative increase of 198,900 tons in greater than two months, an increase of 30.28%, reflecting the weakening demand to float glass and photovoltaic glass, and the downstream pressure has been transmitted to the heavy alkali end. Light alkali inventory has been maintained at greater than 1 million tons to a long time, and increased to 1.0722 million tons in the week of June 26, the highest point of the year. The current inventory 1.017 million tons is still at a high level. The supply and demand pressure was originally concentrated only on the light alkali end, however has gradually been transferred to the heavy alkali, forming a situation of simultaneous pressure on light and heavy alkali.

There is cost support below the soda ash futures price, and inventory suppression above. At present, the spot price has significantly fallen below the production cost. As of the week of August 28, the production cost of heavy alkali ammonia-alkali method was 1370 RMB/ton, and the combined alkali method was 1258 RMB/ton. The national average price was 1065.6 RMB/ton, which was about 300 RMB/ton reduce than the ammonia-alkali method. The sector's cash flow pressure continued to build up. If the loss continues to the fourth quarter, the probability of plant maintenance and passive production reduction will rise significantly. The factors that suppress the upward price mainly come from three aspects: the lack of supply contraction elasticity, the continuation of total demand downward, and the inventory at a relatively high level during the year. Overall, the soda ash market is driven downward, however the valuation has been at a low level, and the main contract is likely to maintain a weak fluctuation direction. Core focus: the progress of soda ash inventory removal, and the substantial reduction of production in high-cost vegetation.