30 September 2013 19:44 [Source: ICIS news]
HOUSTON (ICIS)—The American Natural Soda Ash Corp. (ANSAC), an export consortium organized by three major US soda ash producers, is trying to get its foreign customers to move from annual sales contracts to ones that are negotiated quarterly.
The move to shorter terms would take some of the risk out of the projections and economic foresight needed to negotiate annual contracts for customers and producers, said Sam Blood, ANSAC’s executive vice president of sales and marketing. Blood said that ANSAC is taking the initiative because it will help producers and buyers negotiate sales terms with a much clearer picture of local economic conditions, customers’ demand levels and global economic forces at play.
“It takes some of the guessing out of it,” Blood said. “It’s more likely to have pricing out there that reflects the market.”
ANSAC’s member companies are FMC Wyoming, OCI Resources and Tata Chemicals (Soda Ash) North America. Solvay left the consortium in 2010.
In the US domestic market, sales are governed on an annual basis. That is because soda ash is a mature industry where the product is usually sold in large quantities to large industrial users, including glassmakers, detergent companies, water treatment plants and others. Those users can usually estimate their consumption needs for the entire year.
The costs for producers, too, are also fairly fixed, except for energy prices. Energy surcharges may be added by producers during times of high energy costs.
But in export markets, marketing in varying economies on different continents can be more volatile.
ANSAC sales into the Asian market is already usually governed by contracts that are based on quarterly or six-month terms. Buyers there are more receptive to a shorter contract cycle, Blood said.
Buyers in the Middle East, too, have been more receptive to the change in approach. Blood said.
It is in the Latin America markers where ANSAC has the toughest sales job, Blood said.
Buyers there are used to annual contracts.
“Sometimes, it’s a function of what you’re used to,” Blood said. “For Latin America, this will be a change.”
One buyer, declined to discuss the contract terms on the record, but said the power wielded by the export consortium means that it will likely get its way.
“How can three or four producers get together and decide terms?” the buyer asked. In any other industry this would be described as a market manipulation, he added.
ANSAC has run into accusations of market manipulation before. In South Africa, the consortium several years ago paid a $1 million to settle allegations of price fixing. ANSAC no longer serves as the marketing agent for the member companies in South Africa where they now each market individually.ANSAC is now testing a $15/tonne (€11/tonne) price increase for exports during the 2014 calendar year. About $5 of that increase has been accepted in Asian markets where prices are usually negotiated on contracts with shorter terms.
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