Poland’s Ciech faces renewed competition from Turkey soda ash firms

02 November 2012 12:05  [Source: ICIS news]

LONDON (ICIS)--Potential buyers of Poland’s Ciech group must weigh up the possibility of heavy competition for European markets from expanding soda ash producers in Turkey, Raiffeisen Centrobank said on Friday.

“The Turkish, Indian and Middle Eastern markets will not be able to fully accommodate the new production [of cheaper natural trona-based soda ash in Turkey] and new export routes to Europe are likely,” said Dominik Niszcz, an analyst at Raiffeisen Centrobank.

“Firstly, the Black Sea basin may be flooded with Ciech’s Romanian subsidiary US Govora Ciech coming under pressure,” added Niszcz, saying his analysis was based on a two-year perspective.

Renewed focus from the Turkish producers on the potential for sales in Europe could partly emerge as a consequence of the growing use of anti-dumping duties imposed on soda ash exports by India, Niszcz said.

During October, Ciech, Europe’s second largest maker of soda ash behind Brussels-based Solvay, moved ahead with plans to divest non-core businesses and concentrate on its higher margin, core synthetic soda ash business.

The new management at Ciech is under pressure from its controlling shareholder, Poland’s treasury ministry, to make the company fitter and leaner in readiness for a possible new attempt at privatising it in coming years.

Eti Soda, a member of Turkey’s Ciner Group, has built up its capacity at Beypazari for trona-based soda ash to 1m tonnes/year in recent years and is set to add another 700,000 tonnes/year at the site by 2013 or 2014, as well as a possible additional 1m tonnes/year at nearby Kazan by 2015.

In early 2011, Ciech backed away from the possible sale of US Govora, when initial fears that Turkey’s growing soda ash producers could greatly increase competition in its markets proved unfounded because the Turkish companies had concentrated exports on the Middle East and Asia.

However, Niszcz, who noted that US Govora’s “current good standing” was party based on the shutdown a couple of quarters ago of the second Romanian soda ash plant operated by India’s GHCL, said Ciech and US Govora now had to assess whether there was a renewed threat from Turkey on the horizon.

If the threat materialised, “southern Europe may be affected, which could have some impact on margins in the whole of western Europe,” Niszcz said.

“However, given that Solvay and Ciech practically control the European soda ash market and transport costs are considerable — from Turkey to NWE [northwest] Europe they account for approximately 12% of the selling price currently, without including additional costs for land transport— we believe that it is too early to predict a collapse of margins in the area covered by Ciech, namely central and eastern Europe, Germany, and the Baltic countries,” he added.

Another factor that could protect European soda ash margins was the great expenditure committed to the construction of their plants which Turkish producers wanted to recoup, the analyst said.

“Producers will certainly not be willing to spoil the market, but may rather avoid a long-lasting price war and try to keep the margins at high levels in order to repay loans,” Niszcz added.


By: Will Conroy
+44 20 8652 3214



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