LONDON (ICIS)--European soda ash fundamentals could radically alter from 18 September as Ciech looks to hibernate its plant in Govora, Romania following the termination of a deal for industrial process steam with its supplier.
According to a source, the plant is being prepared for the hibernation and currently running at 20-30% reduced rates.
The hibernation could last up to three years if no alternative suppliers are found and further investments are required to ensure independent supplies of steam to the plant.
The plant has a nameplate capacity of 650,000 tonnes/year, representing close to 8% of nameplate capacity in Europe (excluding Turkey and Russia).
The potential closing of the plant will come at a time when most participants in the European market begin annual contract negotiations for 2020, which are anticipated to start in late September.
However, by the second quarter, it became clear that consumption in the downstream automotive glass-manufacturing sector was weakening compared with 2018.
According to one manufacturer of automotive glass in Europe, demand is "down by 5-6%" compared with 2018 sales year to date, and the second half of 2019 is expected to deteriorate further.
This trend has continued into the third quarter and although firming demand in the container glass segment has countered some of the falling sales in the automotive sector, fundamentals became broadly balanced in the second quarter and remained so into the third quarter.
European and global supply dynamics now face the prospect of tightening conditions late in the third quarter and into the fourth quarter.
In the US market, Searle Valley encountered production problems in early July following a sizeable earthquake disrupting a number of operations at the site.
Searle Valley’s plant represents just over 10% of total US nameplate capacity, according to ICIS data.
Adding to these supply woes, a number of planned turnarounds at sizeable plants have started in the Chinese market, with tightness in that region anticipated for late August.
If planned shutdowns in China end according to schedule, Searle Valley is able to return to production by the end of the month, and poor demand from the automotive industry continues, the potential loss of supply in Europe may not be as significant.
However, Europe itself is largely insulated from the wider soda ash market, with the vast majority of production consumed domestically and the rest mostly being imported from suppliers in Turkey.
Market sentiment in the fourth quarter, coinciding with the 2020 annual contract negotiations, is likely to depend on import availability from Turkish sources for next year, automotive glass consumption downstream, and the potential loss of 650,000 tonnes/year of soda ash.
Soda ash is used in the manufacturing of glass, detergents, chemicals and other industrial products.
Pictured: Ciech's soda ash plant
Source: Michal Warda/WhiteSmoke Studio/Ciech
Focus article by Ciaran Tyler