OUTLOOK ’18: China soda ash market to stay firm on supply concerns

SINGAPORE (ICIS)–China’s soda ash prices may remain propped up by supply concerns as some plants would be required to run at reduced rates due to the government’s pollution control measures during winter.

Further curtailing soda ash output in 2018 is the possibility of tightened supply of limestone feedstock amid the government’s anti-pollution measures, which could leave soda ash producers no option but to run at reduced rates.

“We will need to negotiate with the authorities on the extent of the limestone supply restrictions,” a Shandong-based soda ash producer said, adding that a clear outcome could be expected at the end of 2017.

Mining firms have come under pressure as China stepped up its environmental protection policies this year, resulting in shortages of feedstock for the production of some chemicals. In the case of the soda ash industry, feedstock limestone has been in short supply since September.

In the second half of 2017, China’s export prices of dense and light grade soda ash spiked by around 35% to current levels of $305-315/tonne FOB (free on board) China, largely on account of tight supply amid a heavy turnaround schedule at domestic plants during the period.

Around the middle of the year, more soda ash plants in China were also mandated to reduce production following environmental impact inspections by China’s Ministry of Environmental Protection (MEP).

The prospect of sustained supply shortages and prolonged price uptrend had subsequently prompted some buyers in China’s downstream glass industry and producers to seek imports from Turkey, which is expected to start up a 2.5m tonne/year plant.

But supply of Turkish cargoes to China was insufficient to meet demand as the first shipment may only materialise in December.

Meanwhile, the Chinese domestic market lapsed into a stalemate in November, as both producers and buyers were increasingly reluctant to compromise on their divergent price indications.

In southeast Asia, while prices of Turkish and other deep-sea cargoes were relatively more attractive than China-origin cargoes, the required telegraphic transfer payment and bulk cargo sizes of 10,000-15,000 tonnes for those cargoes are not within the buyers’ comfort levels as they were more inclined to buy on a need-to basis.

In view of the shortage of China-origin material, a southeast Asia-based buyer decided to buy deep-sea volumes for delivery in the first quarter of 2018 at an indicative price of around $290/tonne CFR SE Asia. Negotiations were in progress on the cargo size and final price.

Traders added that suppliers of deep sea cargoes have indicated that 2018 prices may likely be firmer compared with 2017.

By Helen Lee

China Soda Ash plant updates as of 20 November 2017

Company	Capacity (tonnes/year)	Location	Operating rates
Lianyungang Soda Ash Co.	1.3m	Lianyungang city, Jiangsu	80-90%
Shandong Haihua	3m	Weifang, Shandong	90%
Dahua Group	600,000	Songmu island of Dalian, Liaoning	70-80%
Shandong Haitian Bio-Chemical Co.	1.45m	Changyi, Weifang, Shandong	100%
Tangshan Sanyou Chemical Industries Co.,Ltd	3.3m	Tangshan, Hebei	90%

Soda ash is mainly used in glass manufacturing, metallurgy, paper manufacturing, textile dyeing, synthetic detergent, soap, washing powder, water treatment, as well as in the chemical and petrochemical sectors.

Outlook article by Helen Lee