Supply Balanced and Prices Firm for Sodium Bicarbonate

01 December 2003 00:00  [Source: ICB Americas]

The North American sodium bicarbonate industry has been balanced overall, but it remains on the snug side in the higher grades. Demand has grown at about 3 percent annually, says one producer. Off-list pricing has firmed and seen some improvement this year, the result of a successful increase in the fourth quarter of 2002. However, producers nominated another price increase this quarter, citing the need to offset increased energy, raw materials and other costs.

Major players nominated price increases for either November or December. Church & Dwight Co. Inc. was the first to announce an increase, of 1 cent per pound effective November 1. American Soda LLP and Natural Soda Inc. also raised pricing on November 1 by $20 per ton. FMC Corp. raised pricing by $1 per hundredweight (cwt) on December 1.

The price increase "was cost-driven, with soda ash and energy the major drivers," says Art Esposito, senior business director, performance products group, Church & Dwight. "In addition, given our dedication to product stewardship, we look to obtain an adequate return on our ongoing investment in the business to insure consistent high quality products in line with our market and customer needs," he says.

The recent price hike was needed "to offset the increased costs of energy, raw materials and manufacturing," as well as to "guarantee supply of high quality products now and in the future," says Curt Siverling, sales and marketing director, specialty products, FMC industrial chemicals.

"Pricing in the sodium bicarbonate industry remains too low to support reinvestment," says Mr. Siverling. "The fact that two of the four major sodium bicarbonate producers have changed ownership in 2003 is indicative that the financial returns on the sodium bicarbonate industry are too low," he says.

In February, IMC Global Inc. finally completed the sale of its sodium bicarbonate mine and plant in northwest Colorado to formerly named Natural Soda AALA Inc., a subsidiary of AmerAlia Inc., for about $20.6 million in cash. IMC says it did not consider the business a part of its core assets. In September, American Soda was acquired by Solvay America Inc. Since early 2002, natural gas pipeline group Williams Companies Inc. had been trying to sell the unit, which produces nahcolite, a naturally-occurring form of sodium bicarbonate.

Off-list sodium bicarbonate pricing has, however, firmed this year. A price increase in December 2002 resulted in some improvement, particularly for higher quality grades. Sodium bicarbonate list pricing is unchanged at about $22.80 per cwt, USP powder, regular grade, carload, bags, freight equalized.

Last April, FMC and Church & Dwight implemented a temporary 7.5 percent transportation fuel surcharge. Both companies consider the surcharge a "pass through" for costs. The surcharge at Church & Dwight "is still in place, but has ceded to a 3 percent level. It is indexed directly to various fuel indices in the public domain," says Mr. Esposito.

"At FMC, the surcharge remains in place and is simply a pass through of the surcharges that FMC is receiving from the railroad and truck freight carriers," says Mr. Siverling

Supply and demand are balanced overall in the sodium bicarbonate market, and demand has been "growing fairly consistently" at about 3 percent per year, according to Mr. Esposito. "The real issue is on the supply side; the market is relatively stratified," he notes. Higher-value product, like the food and pharma grades, are on the snug side, he says, while on the less differentiated side, such as in the animal feed segment, the market has excess capacity.

However, an official with American Soda has a different view. "The sodium bicarbonate market continues to remain balanced during the third and fourth quarters of 2003 with one exception. Today there is greater supply of the higher value grades as a result of increased production and marketing from American Soda," says Scott Schreiber, director of marketing and transportation for American Soda.

A competitive challenge for producers, substitutes persist in the animal nutrition market. For example, sodium sesquicarbonate (S-Carb) competes with sodium bicarbonate primarily in the animal nutrition market, and is less costly to produce, sources say.

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