Europe 2019 soda ash prices grow by double-digits amid tight fundamentals

Source: ICIS News

2019/02/05

LONDON (ICIS)--Participants in the European soda ash market have settled 2019 annual contracts with increases of €15/tonne compared with 2018 business, depending on the account, starting point and region, sources said on Tuesday.

Although contract negotiations began earlier than last year, with some annual business discussions starting in October 2018, many buyers did not settle all business until later in January 2019.

There were a number of factors for the increase in soda ash prices for 2019, but the main driver was ongoing strong demand and mostly tight supply dynamics throughout Q4 2018 and continuing into early 2019.

The global market was tighter than anticipated for 2018 due to production issues in some markets and environmental shutdowns limiting exports in China.

In early 2018, many participants in Europe expected new capacity that had just ramped up in Turkey would lead to a longer market.

However, one of the lines was wrought with delays, only starting up in September 2018, and according to the latest data from Turkstat, it is likely that the Kazan plant was not running at full rates, even with only four lines operating.

Upward price pressure was also said to have come from rising energy costs for producers, whether they were using gas or coal/coke for production purposes.

Prices rose over 2018 as well due to rising EU carbon credit costs needed to run CO2 emitting production facilities, which squeezed some producers' margins, according to sources.

Fundamentals have remained broadly tight this week with talk in previous weeks of there being scant spot material available in Europe at this time with most sellers sold out for the year.

Stable-to-firm demand in most downstream sectors and the ramping up of new container and flat glass lines in some markets during 2019 is adding to the bullish sentiment.

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Some sellers are not overly concerned that automotive sales slowing down in parts of Europe or Brexit would impact the market significantly, although a wider macro-economic slowdown across key regions such as Europe or Asia could potentially weigh on buying interest in the longer term, if such events occur.

Soda ash is used in the manufacturing of glass, detergents, chemicals and other industrial products.

Pictured: Solvay's soda ash plant in Devnya, Bulgaria
Source: Solvay