Wyoming’s energy industries are likely to regain some ground in the next few years, as coal companies emerge from bankruptcy and oil prices crawl toward higher, more stable levels.
As the debate continues on how energy markets and Wyoming’s economy will look in the future, producers of a less volatile commodity are pushing their product into the public eye, concerned that Asian markets are impeding growth for Wyoming’s No. 1 export: soda ash.
Wyoming supplies about 90 percent of the world’s soda ash, which is produced from trona deposits in southwest corner of the state, according to the Wyoming Mining Association. It is used in a plethora of products across industries, from glass making to the auto industry.
The state’s congressional delegation is lobbying on behalf of the soda ash producers of Wyoming, stressing the importance of the commodity for the state and the nation.
Most recently, Sens. John Barrasso, Mike Enzi and Rep. Cynthia Lummis requested that the issue be brought to the fore in trade talks with China later this year. A bill sponsored by Barrasso would reduce federal royalty rates on soda ash to 2 percent for five years, giving Wyoming producers time to grow capacity and become a more formidable presence in the international market.
China’s economic stagnation has caused an imbalance in the international soda ash market. It is not the first time China’s economy and currency have weighed heavily on commodities important to Wyoming.
It was faith in Chinese demand that stoked the fires of metallurgical coal investment, and it was the lack of that same demand that left companies who’d bet on the Asian powerhouse saddled with billions of dollars in debt. Since late 2015, three of Wyoming’s largest coal producers have sought bankruptcy protection as a result, and hundreds of workers have lost their jobs.
But the soda ash story is slightly more nuanced.
Four companies in Wyoming and one in Death Valley, California, have dominated the domestic market.
“The five companies in the U.S. supply about 98 percent of the domestic demand,” said Bud Grebey, vice president of corporate affairs for Tronox, which operates in Sweetwater County. Grebey has also lobbied on behalf of the soda ash industry on Capitol Hill.
Industry is confident the domestic demand will remain steady, he said.
However, the international market is where trona producers see opportunity.
“Ten years ago 40 percent of the soda ash produced in the United States was exported. Last year, it was 58 percent,” he said. “It is the largest inorganic chemical export in the united states. It is a $1.3 billion annual positive contribution to our trade balance.”
However, as Wyoming’s producers seek growth, China’s economic growth has stalled. The country has turned towards exports to buoy its economy, including producing synthetic soda ash beyond its domestic demand.
“As China’s economy has contracted, China has continued to maintain their soda ash production with excess capacity,” said Grebey. “In 2015 alone, they had a 23 percent increase in exports.”
Wyoming has been directly hit by that change in market balance, said David Caplan, Wyoming spokesman for Tronox.
“What that has done is it has put the downward pressure on the price of the product,” Caplan said. “That has put pressure on the Wyoming producers. It has cut our margins and it is starting to hit home.”
Wyoming’s delegation requested that the issue be broached at the U.S.-China Joint Commission on Commerce and Trade later this year.
“China’s unfair trade practices threaten America’s soda ash producers, and it’s important that Congress and the administration respond,” Barrasso said in a statement.
A sitting bill and a lame duck
Producers and their supporters argue that China has built in advantages over the U.S. — making them competitors in the global market — including fewer health and safety restrictions, lower labor costs and a rebate that the Chinese government offers its soda ash producers on exports.
China has a $30 per metric ton advantage as a result, Grebey estimated.
To combat that advantage, Wyoming’s congressional delegation has offered legislation in Washington to reduce the federal royalty rate on soda ash to 2 percent for five years.
The American Soda Ash Competitiveness Act, sponsored by Barrasso, has sat idle in committee since late 2015.
“I will pursue every opportunity to get this measure passed and to the president’s desk in the lame duck session of Congress,” said Barrasso of the bill.
If the effort by producers and Wyoming lawmakers is successful, trona in Wyoming will be given the time to grow market share worldwide, said Caplan, the Tronox spokesman.
“Really, what we are talking about is leveling the playing field.”