12 February 2008 04:06 [Source: ICIS news]
By Hong Chou Hui
SINGAPORE (ICIS news)--China's extreme winter may soon widen the gap between Asian soda ash contract and spot prices, buyers and sellers said on Tuesday.
The gap had earlier narrowed from $30/tonne (€20.70/tonne) CFR (cost and freight) Asia to $10/tonne CFR ?xml:namespace>
Heavy snow, which began in
Small and medium-sized Chinese soda ash makers struggled to secure their energy sources, resulting in lost capacities of 20-40%. Major manufacturers escaped unscathed and continued production at full speed.
The soda ash industry and its downstream end-user sectors continues to operate at full steam over the Chinese New Year holidays due to continued strong demand for consumer goods and preparations for the Beijing Olympics in August, sellers and buyers said.
The Chinese civil aviation authority recently announced plans for 97 new airports to be built in
Heavy snow, which triggered expressway jams and breakdowns in rail networks, caused transportation problems for soda ash deliveries to
Light grade material, meanwhile, rose CNY50-100/tonne to end the week at CNY1,950-2,050/tonne EXW.
The repercussions of
“When everyone gets back after holidays, there may not be enough cargoes to go around,” said a southeast Asian seller of
“Right now, I’m getting queries of $320-340/tonne CFR southeast Asia (SE Asia) from buyers who’re worried that their Chinese suppliers may not honour the contracts concluded because of the power problems,” he said.
He added that while producers and traders anticipated the restoration of the usual $30/tonne price gap between contract and spot soda ash prices, no one had expected that it would take place so early in the year.
Soda ash spot prices were unchanged week-on-week at $240-250/tonne FOB (free on board)
Talk of export duties being imposed to prevent outgoing cargoes of Chinese soda ash has further fuelled speculation of hikes in spot values, said market watchers.
“I heard from my Chinese suppliers that the Chinese government may soon levy export taxes for soda ash,” said a southeast Asian buyer of Chinese and
“According to them, the production of soda ash is energy-intensive and produces a lot of pollutants so the Chinese government wants to ensure that it is retained for domestic use,” he said.
Contracts for soda ash have been concluded between $230-300/tonne CFR Asia for the rest of 2008.
Market sources said that a $30/tonne price gap was maintained between soda ash contract and spot prices throughout 2007.
This price differential, they said, was intended to offset the additional costs incurred by the making of last-minute transport arrangements due to the urgent nature of most spot deals.
($1 = €0.69)
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