FocusAsia soda ash to rise due to other uses

14 March 2008 03:07  [Source: ICIS news]

By Hong Chou Hui

SINGAPORE (ICIS news)--Alternative uses for soda ash could trigger a further rise in Asian prices for the product, with values set to breach the $350/tonne (€224/tonne) cost and freight (CFR) Asia mark by next month, producers and traders said on Friday.

“Soda ash is increasingly being used to mine precious metals such as vanadium and nickel,” a southeast Asian seller of US soda ash said.

“We’ve had several queries from Australian mining operations producing vanadium to supply them with soda ash but we can’t spare them anything because the demand from Asia is too great,” he added.

Soda ash is used as flux, which helps to speed up vanadium extraction in mining operations.

Soda ash maker, Penrice Soda, concluded three contracts worth Australian dollars (A$) 22m ($21m) per year from December through February to supply soda ash to mining operations in Australia producing vanadium and nickel.

“While soda ash sales to the mining industry currently account for a relatively small amount of our overall sales volume, they will eventually become our second-largest supply segment,” said Penrice Soda’s Managing Director and CEO, Guy Roberts.

He added that the new mining contracts were an important diversification from the company’s traditional glass industry base.

Due to the demand generated by the mining contracts, Penrice Soda was considering expanding capacity at its plant in Osborne, southern Australia.

Vanadium is combined with titanium and the resulting alloy is utilised in aerospace applications. Growing demand for the metal has seen its spot prices double from under $40/kg in 2007 to more than $80/kg currently, industry sources said.

“Even if the miners use 10 tonnes of soda ash to extract one tonne of vanadium, the profit margins are still huge because the cost only works out to roughly 4% of vanadium’s spot price. This is the only industry that doesn’t use soda ash to make an end-product,” said the same southeast Asian seller.

Soda ash spot prices were assessed firmer by $15/tonne at $265-275/tonne FOB (free on board) China from one week ago, based on global chemical markets intelligence service ICIS pricing.

The higher prices were due to tight supply in Asia triggered by shortages in China and transportation problems in the US state of Wyoming.

Asia receives monthly shipments of 100,000 tonnes of soda ash from Wyoming.

“Some sellers in southeast Asia have been taking bullish positions on the back of firming Chinese domestic prices and declared offers ranging between $320-340/tonne CFR southeast Asia (SEA),” a Malaysian trader said.

She added, “While no deals were concluded, these offers may not be too far off the mark because soda ash producers in China are expected to announce their second quarter export prices soon. These could go up to $300/tonne FOB China which would then justify the offers of $320-340/tonne CFR SEA.”

Rumours of export duties being erected to prevent outgoing cargoes of Chinese soda ash have further fuelled speculation of hikes in spot values, said market watchers.

Soda ash is used to manufacture glass and detergent, and both industries are booming in China and India. Flat glass is used for automobile windscreens and building construction.

Major producers of soda ash include Belgium’s Solvay, China’s Shandong Hai Hua and FMC Corp from the US.

The big buyers of soda ash are Japan’s Asahi Glass, Procter & Gamble and Unilever.

($1 = €0.64)

By: Hong Chou Hui
+65 6780 4359

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