FocusAsian soda ash price faces 50% jump in '09

02 October 2008 05:51  [Source: ICIS news]

By Hong Chou Hui

 

SINGAPORE (ICIS news)--Recent negotiations for contractual supply of soda ash to Asia in 2009 have seen bid/offer levels jump by as much as 50% as the global tight supply situation is expected to continue next year, said sellers and buyers on Thursday.

Contractual talks between non-Chinese sellers and their Asian buyers commenced this week, starting at $350/tonne (€248.50/tonne) cost and freight (CFR) Asia and more, representing a hike of between $10-120/tonne from existing contract prices of $230-340/tonne CFR Asia for delivery in 2008, market sources said.

 

“This is only the starting level for 2009 contracts. Depending on the volumes ordered and when the deals are signed, we may charge as much as $400/tonne,” said a seller of US soda ash based in southeast Asia.

 

Chinese sellers who supply the majority of Asia’s requirements, were heard offering contract material from $330/tonne CFR Asia onwards, an increase of $30-80/tonne from current term prices of $250-300/tonne CFR Asia.

 

“All the sellers are keeping their fourth quarter spot and term soda ash offers unchanged to build up some goodwill which they will use to extract better contract prices from us,” said a northeast Asian buyer.

 

The 2009 contract supply negotiations are on par with current spot prices seen this week, which were hovering at $330-350/tonne CFR NE Asia based on data from global chemical markets intelligence service ICIS pricing.

 

Supply is projected to remain tight in 2009 despite the weakening US housing market and addition of new production capacities, market sources added. However, fresh supply is expected to come on stream next year but will not be able to match global demand, sources said.

 

“The US housing market took a downturn due to the current financial turmoil and this freed up almost 150,000 tonnes of soda ash in 2008. The material was, however, absorbed by Latin America so none of it was allocated to Asia,” added the southeast Asian-based seller of US soda ash.

 

“A debottlenecking at FMC’s Granger plant from now until 2012 will add 100,000-150,000 tonnes annually to its current capacity of 1.2m tonnes/year but the soda ash has to be split up between end-users in Latin America, Asia and the Middle East so it looks like supply will continue to remain snug,” he said.

 

ICI Pakistan’s expansion at its Khewra plant which is slated to be completed by March 2009, would expand its soda ash output by 65,000 tonnes to 350,000 tonnes/year but this would be channelled into domestic sales, said a source from the company.

 

Magadi’s new 350,000 tonne/year plant in Kenya offered a glimmer of hope to Asian soda ash buyers when operations commenced in July. The plant is currently running at 40% capacity and a company source had previously told ICIS that term material would be sold to downstream end-users in the region by early 2009 if the facility achieved full production.

 

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 Corporation from the US.

 

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

 

($1 = €0.71)

 

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By: Hong Chou Hui
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