Soda ash on a high

14 March 2005 00:01  [Source: ACN]

Asia is experiencing a shortage of soda ash as Chinese demand rises sharply. VCM values vary widely, with Southeast Asia seeing sharp increases in prices

Soda ash: Prices soared to a new historic high on the back of tight availability and robust demand. A Japanese producer said that Asia was experiencing a huge shortage as the demand for soda ash in China was outstripping supply.

‘There has been a huge decrease in soda ash exports from China since the beginning of 2005. Asia is now relying on imports from the US, and prices for deep-sea material have been increasing rapidly,’ said the producer. An increase in domestic demand for soda ash in the US market would also mean that deep-sea availability to Asia would decrease in 2005.

Other factors supporting the increase in soda ash prices were the high costs of coke, coal and natural gas.

Prices of soda ash were last week at US$195-220/tonne cfr NEA, unchanged from prices in February and January. Spot prices in SEA rose by US$20/tonne to US$240-260/tonne cfr SEA, unchanged from prices in January and February

Caustic soda: Prices were stable and the Asian market was well-balanced. March prices were at US$260-280/tonne fob NEA, unchanged from prices in January and February.

A Chinese producer said demand in China was still muted, as not many buyers were looking for spot material.

It said demand would pick up in April, when most of the alumina users’ inventories would be depleted.

‘Demand usually starts picking up from early April. This also coincides with the turnaround schedules of many Northeast Asian producers. Prices will definitely start surging from early April.’

Major caustic soda producers in Northeast Asia were planning turnarounds in Q2 2005.

Formosa Plastics Corp (FPC) will shut down its 790 000 tonne/year plant in Mailiao, Taiwan, on 14 March for 14 days. FPC also plans to expand its 233 000 tonne/year plant in Kaohsiung, Taiwan, by 130 000 tonne/year by June 2005.

Hanwha Chemicals will be shutting down its 210 000 tonne/year caustic soda No 1 line in Yeochun, South Korea, for 14 days in May.

Tosoh Corp will be shutting down its 185 000 tonne/year plant in Yokkaichi, Japan, for a 30-day turnaround in mid-May.

A source close to the company said that, during its shutdown, Tosoh would be reducing its exports of spot material as most of its material would be kept for domestic consumption.

An anticipated increase in US prices was also keeping Asian prices firm.

A South Korean producer said producers in the US were increasing caustic soda prices by US$40/tonne.

It added: ‘If the price increase is achieved, we will see an increased amount of Asian material heading for the US, causing prices to rise in Q2 2005, when there will be limited availability in Asia.’

EDC: Prices were firm on the back of increasing crude and strong ethylene values.

Deals last week were concluded at US$520-540/tonne cfr SEA, US$30-50/tonne higher than in February and January. Prices in China increased by US$20/tonne from the previous two months to US$510/tonne cfr China.

A Middle Eastern producer said it intended to increase offers by US$10-20/tonne cfr SEA.

It said: ‘Ethylene costs had been hovering around US$1180/tonne cfr NEA/SEA for the past few weeks, and crude values are high as well. Although we are facing resistance from our customers, there is no way that we can lower prices with such high feedstock costs.’

The producer added that EDC supply would be tight in March and April, as there was no spot EDC material moving from the US to Asia. ‘With EDC prices from the US at US$530-550/tonne fob USGC and freight rates at US$60-80/tonne, no buyer in Asia would take spot material from the US.’

A Japanese trader felt the same way.

It said that EDC material from the US was likely to remain too costly for Asian users, given the strength of their own domestic market.

‘This trend is not likely to change in the next two months,’ it added.

Other producers in NEA, however, thought differently.

A South Korean producer said it was unlikely that EDC prices would rise beyond US$520-540/tonne cfr NEA/SEA, as the anticipated rise in demand had been dampened by several vinyl chloride monomer (VCM) plant outages.

With excess spot material available owing to the shutdown of Asahimas Chemical’s 250 000 tonne/year VCM plant in Cilegon, west Java, Indonesia, some industry players were expecting the EDC market to soften in the short-term.

A Japanese trader, however, disagreed. It said that most of the material was heading for the Indian market.

The trader added that, even if the material was sold to the SEA market, increasing freight rates would still keep prices at US$520-530/tonne cfr SEA.

VCM: A wide disparity existed between prices in Southeast Asia and Northeast Asia.

Producers were finding it hard to increase prices in China owing to weak demand from Chinese polyvinyl chloride (PVC) users.

A Chinese producer said power shortages and transportation problems had caused PVC producers to keep their operating rates at 60-70%.

It added: ‘The cold weather has also dampened demand for PVC because construction works are being delayed.’

It said that Chinese PVC producers were resisting the high VCM costs, as domestic PVC prices had not risen fast enough.

The producer observed that, with Chinese domestic PVC prices at Rmb8000-8100/tonne delivered, many Chinese PVC producers were suffering losses.

Southeast Asian prices were, however, rising sharply.

Availability was limited, with VCM Malaysia keeping operating rates at 50%.

Adding to the tightening supply was an outage at Asahimas Chemical’s 250 000 tonne/year VCM plant in Cilegon, west Java, Indonesia.

The plant was shut on 2 March and was scheduled to be restarted only after mid-March.

The high prices prompted a Japanese producer to increase its planned VCM exports to SEA in April.

The producer said it exported an average of 12 500 tonne/month of VCM to SEA, and it intended to increase that amount by 10 000 tonne in April.

In Northeast Asia, prices were at US$750/tonne cfr China, US$50-60/tonne higher than in January and US$10-20/tonne higher than in February.

In Southeast Asia, prices soared to US$830-850/tonne cfr SEA, US$100-120/tonne higher than in February and US$130-150/tonne higher than in January.

BULK CHLOR-ALKALI PRICES, US$/TONNE

Product	Asia1	US2 Export fob US Gulf	Europe2 Export fob NWE
Caustic soda4	260-280 fob NEA	330-375	250-254
Soda ash3	195-200 cfr NEA	120-135	190-215
Ethylene dichloride	510-540 cfr Asia	507-529	368-399
Vinyl chloride monomer	750-850 cfr Asia	800-820	688-704

US$/tonne cfr Asia for lifting in the current month

2 Prices courtesy of Tecnon OrbiChem (London) and Anorganica for lifting in the current month

3 fob US West Coast in bulk

4 US$/dry metric tonne fob Asia

Prices are obtained by the ACN team through consultation with producers, consumers and traders. ACN Chlor-alkali Report appears in March, June, September, and December

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