Rio cautious on salt demand

RISING demand for salt from Asian buyers and the resultant price spike is welcome news for producers in Western Australia, but doubts remain about the long-term sustainability of the Chinese market in particular.

Demand for industrial salt, which is used to make chlorine and soda ash – ingredients in basic construction and manufacturing items such as PVC and glass – has surged, particularly in Asia where divisional manufacturing bases are feeding China’s massive industrial development.

According to Asian Chemical News, Asian prices for delivered salt (cfr) were up 66 per cent in November, to $US50 a tonne.

An acute shortage in the Chinese domestic market has caused domestic prices to rise to $A77 per cfr tonne, between $A25 and $A33/t higher than in October.

As a result the Rio Tinto-controlled Dampier Salt, which owns three operations in WA’s north-west and is one of the world’s biggest suppliers, is investigating a major expansion. It plans to progressively lift production across its Western Australian salt operations from 8mtpa to 11mtpa by 2008.

Dampier Salt has also started commissioning a new $50 million plant at its Dampier operations, which it’s hoped will bring significant cost reductions and a production increase in the range of 200,000t/year.

Former copper miner Straits Resources is also developing plans for a 3mtpa salt operation at Exmouth Gulf, to be operated by subsidiary Straits Salt.  It is targeting first production for late 2008.

But while China’s industrial expansion is driving an expansion of the Western Australian salt sector, its domestic salt shortage, caused by a combination of increased domestic consumption and bad salt harvests, has also created a divergence of views among producers.

Dampier Salt managing director Adam Parr said his company’s planned expansion was in response to overall Asian demand, which ultimately was being driven by China’s industrial growth, rather than actual Chinese salt demand.

“While it [China] is a significant market for us there is nothing to suggest it will be our biggest market for quite a while because it has its own sources,” Mr Parr said.

Rather, he said, the recent spike in Chinese salt demand, particularly from the soda ash industry was “very short term” and was simply the result of bad Chinese harvests.

“I think that has given a lot of people the impression that Chinese demand for imported salt has gone mad, like iron ore,” he said.

“I think that is incorrect.”

But Straits Salt project manager David Readett, who recently visited China, said he believes Chinese salt imports will remain strong for two reasons.

“They [China] are close to their peak production and it is going to be very difficult to produce any more salt in the foreseeable future,” he said.

The Chinese Government is currently drawing up plans to convert salt fields into cultivated land.

Secondly, Mr Readett said, long industry response times to boost salt production would make it difficult for producers to meet the demand in the near future.

“In the medium term we believe that there is only limited expansion capacity for the existing producers, globally, and what we are looking at doing is trying to capture that additional market,” he said.

“One would suggest that there is already a significant shortfall in the market, so I guess we are feeling quite comfortable.”

Two other major West Australian salt producers, Shark Bay Salt Joint Venture and Onslow Salt, which together produce almost 2mt of salt, could not be contacted by the time WA Business News went to press.