Solvay price increase for US soda ash may open 2015 contract talks

HOUSTON (ICIS)–US soda ash producer Solvay North America has announced a $14/ton price increase for North American product, a move that market participants on Wednesday called an opener for 2015 contract negotiations.

“Demand for export product is more than US producers can meet,” one producer said. “I definitely expect to see larger increases this year based on the reduction of [global] production capacity we’ve seen this year.”

Producers won an increase of about $7/ton for the 2014 contract after seeking $15-20/ton during 2013.

The Solvay announcement serves as the first indication from producers of their intentions for 2015, a buyer said. The announcement is a little early, the buyer said, adding that market conditions do not warrant a price increase.

“We think a 2 or 3% increase is more in line with what the market is indicating,” the buyer said.

But producers are pointing to the number of production cutbacks, including at Solvay plants in the Mediterranean basin, Tata Chemical plants in the UK and Kenya, and Penrice Holdings cutbacks in Australia. Altogether, the decline in output over a two-year period amounts to more than 1.5m tonnes/year.

A producer said that it estimates that organic economic growth should increase soda ash demand by more than 2m tonnes during the period.

“So you very quickly go from long supply to an equation that is in balance or running on tight supply,” the producer said.

Producers have increased production by about 4% during the first quarter, mostly using debottlenecking and manufacturing efficiency programmes to increase production without major capital outlays.

Solvay’s increase includes list and off-list pricing and is effective July 1 on an FOB (free on board) basis at its production facility in Green River, Wyoming, according to a release the company sent to customers.

Other major US producers include FMC Wyoming, Tata North Chemicals, OCI Wyoming, Solvay and Searles Valley Minerals.