Price and market trends: FMC sees weaker than expected soda ash prices in the next 6-9 months

09 August 2013 15:23  [Source: ICB]

US-based FMC CEO Pierre Brondeau expects that the company will have to endure softer-than-expected soda ash prices for the next six to nine months as Chinese producers get rid of unused product and begin to shutter unprofitable plants.

"We believe that Chinese producers are selling at below their costs," Brondeau said ­during the company's second-quarter earnings conference call on 30 July. "We have decided to be careful for the next six months (on predictions) but expect to see the improvement coming in early 2014."

Brondeau said FMC, the largest soda ash producer in the US, expected prices to hit the bottom of a trough in the first quarter and then grow through the second and third quarters. However, the price recovery has been slower than predicted, he noted.

US soda ash

The slowdown of economic activity in China has forced ­producers to adjust pricing and operations to compete with ­suddenly aggressive Chinese pricing tactics.

Soda ash is used in the production of glass, detergents and other chemicals and is therefore sensitive to fluctuations in the construction and auto manufacturing industries, which are heavy users.

PLANT CLOSURE

Belgium-based producer Solvay has announced that it will close a plant in Portugal and will ­rationalise production at plants in Italy and Belgium, raising or lowering production to meet weakened European demand. The company said it will ­increase production at its Green River, Wyoming, US plants by 12%.

FMC is also working to ­increase production of natural soda ash at its Green River facilities. The company said that its "Manufacturing Excellence" pilot project there yielded immediate results and that it will implement the programme at all of its Green River facilities over the next 18 months for a 10% increase in capacity with lower production costs.

Natural soda ash, produced from the naturally occurring mineral trona, boasts lower production costs and therefore holds a competitive price advantage over synthetic soda ash, which is produced from a chemical process.

Wyoming is home to one of the world's largest trona reserves. Solvay, FMC, Tata Chemicals Partners and OCI Chemical operate soda ash mining and production facilities in the Green River Valley area of southwestern Wyoming.

FMC lowered its overall earnings per share outlook for 2013 to $3.80 (€2.85), down from guidance of $4 earlier in the year based on acquisition costs related to the recent purchase of a European maker of omega-3 fatty acids and the lower soda ash prices.

In the second quarter, revenues in the company's mineral division - which includes soda ash and lithium - were down by 2% from the year-ago period to $244m and profits were down 21% to $35.4m. The company blamed Chinese competition in soda ash for the decline, although the company said that lower prices were somewhat offset by higher volumes.

FMC noted that it saw sequential improvements in Asian export soda ash pricing in the second quarter, and anticipates sequential improvements in each of the third and fourth quarters.


By: Bill Bowen
+1 713 525 2653



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