Tata Chemicals’ soda ash is used by some of the world’s biggest manufacturers of soap, detergents and glass

Amidst global market upheavals, Tata Chemicals is working with renewed vigour to fortify its leadership in the industrial chemicals business

The industrial chemicals business doesn’t sound like it has much to do with the general public, but indeed it does. Tata Chemicals, for instance, is the world’s third-largest producer of soda ash, which is used as an input by some of the world’s biggest manufacturers of soap, detergents and glass. The chances are high that you and me touch a bit of Tata Chemicals every day.

“Traditionally, Tata Chemicals has had the highest share in the Indian market and our new investments will help in restoring our leadership position.”

Sanjiv Lal, CCO, India operations, Tata Chemicals

Tata Chemicals caters to its global clients by producing about 4 million tons of soda ash across its manufacturing operations in India, USA, the UK and Kenya. It is not uncommon for the company’s wide range of soda ash products to be shipped from Kenya to India, or from its North American factory to the UK. “We have a global customer base and are well-integrated. We send products across geographies to supplement market gaps that might exist,” says Zarir N Langrana, president, global chemicals business, Tata Chemicals.

That succinct sentence sums up the company’s customer-centric strategy that has helped it thrive and maintain its position as a market-leading player. While soda ash is the core business, Tata Chemicals also makes sodium bicarbonate and allied products such as caustic soda, cement and industrial salt — that together cater to diverse industries such as textiles, food, feed, mining, pharmaceuticals, environment control and chemical processing.

Tata Chemicals is also present in the consumer products and agri segments, but the industrial chemicals business is the company’s bread-and-butter, and has been since 1939, when it first set up a small marine chemicals plant at Mithapur in Gujarat, India.

LEADERSHIP IN INDIA

According to Sanjiv Lal, COO, India operations, Tata Chemicals has maintained its leadership position in soda ash in India for years. That ranking slipped a little last year when some of the company’s competitors increased capacities by debottlenecking operations. Tata Chemicals is now investing to increase aggregate production capacities across multiple products at Mithapur to ~3.5 million tons, up from about ~2.5 million currently.

Tata Chemicals’ Mithapur plant focuses on water and waste conservation as a part of its sustainability initiatives

“Our capacity enhancement is presently in the environment clearance process and entails an investment of 28 billion. We will expand our soda ash production to one million tons from 0.8 million tons. Tata Salt’s capacity is being expanded to 1.45 million tons from 0.9 million tons. Similarly, cement capacity is being increased to 0.9 million tons,” says Mr Lal.

“We have a global customer base and are well-integrated. We send products across geographies to supplement market gaps that might exist.”

Zarir N Langrana, president, global chemicals business, TCL

“Traditionally, Tata Chemicals has had the highest share in the Indian market and our new investments will help in restoring our leadership position. With our production facilities located in four continents, we are best placed to meet customer requirements in India and maintain our market position through supplementing domestic production with imports from our US and Kenya facilities,” says Mr Lal.

What sustains the chemicals business is its global footprint and strong customer connect. Demand for soda ash is broad-based, linked to GDP growth and less prone to swings as compared to other commodities. It has been clocking moderate and steady average growth rates — around 2-3% annually. Developing markets such as India, South East Asia, Latin America and the Middle East generate higher demand, touching levels of 7-8%, but these are countered by weaker pulls from the western markets.

This is where the global nature of the business helps stabilise demand. “The market for soda ash is well-balanced today and we see this continuing into the future as well,” says Mr Langrana. It is this wide global presence that also assures customers of reliability in supplies. “In the unfortunate event of supply chain disruption in some geography, we provide back-up supplies, and this gives comfort to our clients,” he says.

Mr Langrana is just as bullish about the prospects for sodium bicarbonate, another chemical where Tata Chemicals occupies a global leadership position, ranking as fifth-largest producer in the world. Produced at its Mithapur and UK plants, and used by the pharmaceuticals, food, feed, dyes, flue gas treatment and textile industries, sodium bicarbonate is where the action is building up now. “It is an extremely versatile chemical with diverse applications. We plan to expand our footprint into other geographies including Africa, South East Asia and North America,” he says.

Although soda ash and sodium bicarbonate will continue to be the big ticket items, the challenge before the company is to constantly reinvent itself.

In India, the company is looking at venturing into emerging specialty chemicals such as highly dispersible silica (HDS). The company has developed a variety of HDS that can make automotive tyres smoother and hence use less fuel, thus being more environment friendly. With new environmental standards coming in around the globe, demand for HDS will grow rapidly. According to Mr Langrana, the company is looking to develop a greenfield HDS plant in India.

For the main chemicals business, the company is looking at technologies that will change operations. Mr Langrana explains, “In the long-term, digitisation and automation will change the way we manufacture, move and market; it will impact productivity, costs, sustainability, and the way we interact with customers and supply chain partners.” Digitisation will have a major impact on key functions. Mr Langrana says the the company has launched a best-in-class solution, based on the Ariba platform, for the procurement function. “It has brought in a lot of efficiencies around cycle time reduction and efficiencies. Additionally, it has made price discovery easier and more comprehensive and competitive, and will serve to be yet another tool for driving integration across our regions.”

For customers, Tata Chemicals has launched a cutting-edge CRM solution in India, and plans to roll this out to customers in other geographies as well. “Our customers now have the convenience of placing orders, checking their status, logging feedback, making payments and checking their accounts from their mobile devices. This also provides us with a 360o view of all our customers on a real-time basis,” says Mr Langrana.

Tata Chemicals’ future-looking story is being played out across the company’s four-continent manufacturing footprint.

TAILWINDS IN THE US

In the US, Tata Chemicals is present as Tata Chemicals North America (TCNA). Producing soda ash since 1884, TCNA’s manufacturing operation in Green River, Wyoming, is one of the largest soda ash production facilities in North America, with an underground trona mine spanning 55 square miles.

Tata Chemicals’ manufacturing operation in Green River, Wyoming, has access to natural ore which helps reduce cost of production

Trona is a naturally occurring mineral ore that contains a mixture of soda ash and soda bicarbonate. “It gives us a huge advantage as it allows us to operate at a lower cost base,” says TCNA managing director Martin Keighley. TCNA mines more than 4.5 million tons per year of trona ore that it processes into soda ash at its surface refining plant.

“Our challenge was to develop markets and we have been very successful in doing that.”

Martin Keighley, managing director, TCNA

For TCNA, the access to trona reserves is a huge plus factor as it offers a lower cost of production that reflects in greater profitability. The challenges lay elsewhere. “Our challenge was to develop markets and we have been very successful in doing that,” says Mr Keighley. “Nearly 50% of our soda ash is now sold outside the US and Canada.”

The other challenge lay in staying ahead of technology. The Green River facility will complete 50 years of operation next year. “The challenge was to manage modernisation and renewal of the facility. We have to put in a lot of effort to improve reliability, technology and productivity. There are engineering and technology-related challenges, as well as the shortage of skilled personnel,” Mr Keighley explains.

TCNA, which generated revenues of $476 million last year, has made significant investments to reduce emissions of nitrous and sulphur oxides at its Green River plant. It has also put in place processes to collect and reuse waste material generated. In fact, the company has succeeded in recovering and disposing all the waste generated over the past 50 years. Water is another focus area and TCNA now recovers more than 80% of the water that previously was lost in the evaporation ponds.

Looking ahead, Mr Keighley says that the company is exploring modernisation and digitisation in a big way. TCNA plans to use new control systems to improve productivity. “We have a major project, which over the next two to three years will result in the adoption of cutting-edge technology,” he adds.

TURNAROUND IN EUROPE

For Tata Chemicals in Europe, the picture is very different. Tata Chemicals Europe (TCE) is one of the continent’s leading producers of soda ash, sodium bicarbonate and industrial salt. It generated revenues of £180 million in 2016-17.

Here the challenges deal more with margins and effective cost of manufacturing. Dr Martin Ashcroft, managing director, TCE, explains that the UK’s relatively volatile gas market and carbon pricing under the Emissions Trading Scheme impacts soda ash manufacturing, which is an energy-intensive industry. “We have the highest environmental standards in the world, so we need to be constantly at the cutting edge of technology on energy use,” he points out.

Tata Chemicals Europe’s strategy to focus on lowering energy costs has paid off

The company’s energy challenge emerged after operations at its two soda ash factories in Northwich, UK, turned uneconomical due to high energy costs. “A whole new plan had to be devised, which involved acquiring the CHP power station and closing the Winnington soda ash plant,” says Dr Ashcroft.

The company went all out to ensure that customers were not affected at all. “A new import-based ‘virtual factory’ was set up to provide customers with the vital ‘dual source’ strength only TCE could provide,” says Dr Ashcroft, referring to Tata Chemicals’ agility in managing global supply lines for its customers.

The restructuring that was undertaken has started showing results. “Holding our nerve over a prolonged turbulent period has borne fruit. The EBITDA in FY17 was £27 million — up from £13 million in FY2015 and virtually zero in FY2014. The energy business (CHP plant) has turned around what was a £10 million loss in the first year and forecasts £8 million profit in FY2018,” Dr Ashcroft says. Soda ash efficiencies also made “outstanding” contribution to profits and the industrial salt business has been an unqualified success.

“In the UK, our target is to gain sales in exports of industrial salt and sodium bicarbonate.”

Dr Martin Ashcroft, managing director, TCE

TCE’s future lies on the path of technology. Digitisation has helped the energy business improve productivity and profitability. Dr Ashcroft explains that the energy business unit has done some phenomenal work on digital data analytics. “This is not just about efficiency, but much better information to make decisions on a daily basis. In FY17 alone, it helped save £400,000 on our energy costs,” he adds.

The good news is that in the EU, demand growth has rebounded after a long absence, though growth in the UK continues to be weak. “In the UK, our target is to gain sales in exports of industrial salt and sodium bicarbonate,” Dr Ashcroft says.

REVIVAL IN MAGADI

The fourth pillar of Tata Chemicals’ four-continent foundation is Tata Chemicals Magadi (TCM) in Kenya. TCM sits on the vast trona deposits near Lake Magadi. The ore — which will last for more than 300 years — was discovered in 1902 and TCM is the only player in the 164 sq km Magadi complex.

Tata Chemicals Magadi’s turnaround strategy has led to an increase in productivity and revenues

TCM too has undergone its share of financial troubles. In 2014, the company saw a major restructuring that led to the mothballing of its high-value premium ash manufacturing plant. “The mothballing of the plant resulted in significant loss in revenues of nearly 35% to 40%,” says Jack Muchira Mbui, managing director, TCM.

“We have a number of projects under innovation, which could result in lowering the cost of production.”

Jack Muchira Mbui, managing director, TCM

That strategy is now showing positive impact as the company is finally witnessing a major turnaround. “Productivity at the standard ash manufacturing (SAM) unit and the salt plant (which produces industrial salt) has improved and revenues are also rising steadily. We have moved from making losses to showing profits. The team has become more agile and there is a significant change in the company’s culture,” says Mr Mbui.

There’s more work to be done, though. Mr Mbui points out that the company will have to restructure the manufacturing process to some extent and also inject some cash to revive the project. “We are looking at quality improvement initiatives for the SAM unit. We have a number of projects under innovation, which could result in lowering the cost of production. We have also enlisted the support of the TCL Innovation Centre at Pune,” he says.

That’s good news in the offing for customers. TCM is the largest soda ash producer in Africa, but according to Mr Mbui, the company is not able to match customer demand today. South East Asia, the Middle East and India are the major markets for the company. Kenya accounts for about 6% of its market and Africa about 12%. “Our biggest buyers are glass manufacturers in India,” he says.

The revival across its constituent geographies is a cause for optimism at the headquarters in India. Considering the enormous growth opportunities across the four continents, it is but natural that the Tata Chemicals’ top brass is bullish about future prospects. “We believe our business will grow, but it might be a little differently,” says Mr Langrana. “While we continue to look at volume growth, we are also focused on value growth through innovation and sustainability.”

For the end consumer, this can only mean a little more of Tata Chemicals in their daily lives.

Sustainability is key

Mithapur in Gujarat is home to Tata Chemicals’ chemicals and consumer products units. It is also a drought-prone area and access to water is a challenge. Tata Chemicals has today reached a stage where it draws zero fresh water for its manufacturing operations. “All our water requirements at Mithapur are met from the sea — we recycle and reuse seawater and do not draw fresh water from the ground, the lakes or rivers. Our priority is to ensure that all the fresh water is saved for the local community,” says Zarir N Langrana, president, global chemicals business.

Soda ash manufacturing is a highly energy intensive process. Continuous energy audits and measures to bring energy consumption down is a key activity across the plants.

All the flyash that is generated at the Mithapur plant together with other waste streams from the unit is converted into cement, which is sold under the Tata Shuddh brand. “Tata Shuddh is a profitable business, and one that is fully integrated with the mainstream soda ash unit. But we do not see ourselves as a national or state level player in cement; for us, it will continue to be a sustainability initiative for waste utilisation,” says Mr Langrana.

Tata Chemicals also focuses on biodiversity programmes and campaigns to protect whale sharks, mangroves and coral reefs. These are done directly by the company as well as jointly with the Tata Chemicals Society for Rural Development.

— Nithin Rao