FocusFurnace closures have little impact on Europe soda ash demand

14 December 2012 12:34  [Source: ICIS news]

LONDON (ICIS)--Soda ash demand in Europe is surprisingly stable even as several float glass furnaces have shut down, closed or are being idled, sources said on Friday.

Pilkington, a subsidiary of Nippon Sheet Glass Group (NSG Group), is the latest glass producer to announce it would idle production at its UK facility from 3 January 2013.

"As a consequence of the overcapacity that still exists in the European glass industry, the NSG Group has informed the employee representatives concerned that one of its UK float lines, “CH2” Float Line in Cowley Hill, UK, will be kept out of operation on ‘hot hold’ from 3 January 2013. At present it is expected that the line will remain on hot hold for three months," the company said in a statement on Friday.

Hot-hold means the furnace is heated, but it does not produce any glass. Furnaces are difficult to start up, so glass producers prefer to idle plants in a hot-hold status instead of shutting them down when demand drops.

In April, Pilkington closed another line at the same site citing similar reasons. In addition, in November, NSG Group announced it would close two other float lines, one of which is in Halmstad, Sweden, affecting approximately 230 workers. The line is expected to be closed by the end of March 2013.

The second line is in Porto Marghera, Italy, affecting about 140 workers. The furnace in Porto Marghera has been in a hot-hold position since July 2012. The line will be completely closed from January 2013.

NSG will also close its Ylojarvi, Finland and Landskrona, Sweden plants that supplied the automotive industry with glass parts.

Another glass producer, Saint Gobain, stopped several furnaces in Portugal, Belgium, France and Germany in 2012, resulting in a 19% reduction in output. Other glass manufacturers have also cut output and decided to idle production facilities in response to weak demand from downstream markets.

However, not all is doom and gloom. Guardian Industries Corp., a US-based glass producer started up its Krasny Sulin, Rostov, Russia float glass line this week.

The new plant will produce residential and commercial glass products mainly for the Russian and Ukrainian markets. The project cost $220m (€167m) and will produce 900 tonnes of glass per day, making it the company's largest unit. Guardian also has another plant in Ryazan, near Moscow.

"Our sales programs at the new plant will focus on the southern Russian and the East Ukrainian regions,” said Janos Egyud, managing director of Guardian Steklo Services, the company overseeing the Ryazan and Rostov plants, in a statement.

Reacting to the furnace shutdowns, one European soda ash producer said that usually this would affect soda ash demand, but because offtake from the soaps, detergents, pulp and paper and sodium bicarbonate industries is strong, they have not really felt the effects of the furnace closures yet.

Most European players are in the process of negotiating their 2013 annual soda ash contract prices and producers are targeting €10/tonne increases while buyers seek to limit this to rollovers, or €4-6/tonne increases maximum.

Producers conceded that in some cases they will not be able to achieve the targeted €10/tonne rise, because resistance from buyers is strong, but because of higher transportation and energy costs in 2012 they will push hard to raise prices by at least €5/tonne.

One western European soda ash producer said that the market is "a bit strange" now as one would expect weaker demand given all the furnace shutdowns this year, but because sales to the soaps and detergents and other downstream industries is strong, there is no downward pressure on contract prices, it said. In addition, lower imports to the EU have helped European-origin soda ash sales.

During the first eight months of last year, 819,901 tonnes of soda ash were imported to the EU from the rest of the world. However, during the same period of 2012 only 698,662 tonnes were imported, which means European producers could make up the difference.

A buyer said that the situation in Europe is not brilliant. "There is a shift towards moving glass production to emerging economies like Russia, because European flat glass demand is poor, so European players just have to wait and see how things develop next year," the buyer said.

($1 = €0.76)

Follow Janos Gal on Twitter @janosgalICIS

By: Janos Gal
+44 208 652 3214

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