Soda Ash Prices Trend Down on Lower Demand
Soda ash prices slipped down again in July to $195/net ton from their May peak of $202, but buyers say the ongoing battle between U.S. and Asian suppliers makes it extremely difficult to forecast true soda ash supply and demand trends.
As reported earlier this year on Purchasing.com, soda ash prices spiked in January and continued up until recently, when they began to tick down. But the reason for the plateau and slight decline in prices is hard to put a finger on, while the future outlook for soda ash prices is even more complicated, involving import/export trends and soda ash's inter-relation with other materials.
For buyers looking to source soda ash domestically and avoid costly transportation costs, the market is not in their favor.
"The soda ash suppliers in the U.S. would rather export soda ash than sell it domestically because they can get more money by exporting the material," one soda ash buyer in the Midwest tells Purchasing.com. As a result, this buyer says it is difficult to get competitive soda ash pricing from U.S. suppliers because in many instances, the suppliers really don't want the U.S. business.
"The U.S. suppliers seem to keep with their current customers and not try to add any additional business. It is kind of a ‘take it or leave it' kind of relationship."
It's not just that buyer's imagination. On its second quarter earnings call, officials from FMC Corp. confirmed those sentiments saying "we intend to take full advantage of the low cost position of U.S. production to focus on gaining global market share at attractive margins. We intend to do so primarily by acquiring new customers export markets such as Asia."
And while U.S. producers are targeting Asia, Asian soda ash producers are targeting U.S. buyers. According to a recent Associated Press report, Chinese soda ash exports grew 40% in the first three months of 2009 vs. the same period last year. "They're exporting quite a bit more, and what they're doing in the process is lowering the sales price on the export market, which then makes it very difficult for the United States to compete," said Dennis Kostick, a senior minerals commodities specialist with the USGS, in the Associated Press report.
But while domestic demand for soda ash from some of its major end-market industries including glass and detergents is down, producers are also scaling back soda ash production in the U.S. drastically. According to the latest data from the US Geological Service, for example, "global economic problems have reduced world soda ash consumption, which in turn has reduced U.S. soda ash exports. To avoid an oversupply of soda ash inventories, domestic soda ash production has been cut back intentionally."
FMC in the first quarter temporarily curtailed production at its Granger facility, capacity which was brought on over the last few years to supply growing export demand. And Georgia-based OCI Chemical Corp. said this week it is laying off 38 of its 400 employees at a soda ash plant near Green River, Wyo. Company officials say the layoffs are a result of weakening global demand for soda ash.
Another factor that may push soda ash prices down is its relationship to caustic soda, which has dropped off in price recently. Earlier this year, FMC officials said that when caustic soda prices are over $400, the demand for soda ash as a lower-cost substitute increases and, thus, prices for soda ash increase. But as reported by Purchasing.com recently, caustic soda prices have plunged, lessening the need for a lower-cost substitute such as soda ash.
As reported earlier this year on Purchasing.com, soda ash prices spiked in January and continued up until recently, when they began to tick down. But the reason for the plateau and slight decline in prices is hard to put a finger on, while the future outlook for soda ash prices is even more complicated, involving import/export trends and soda ash's inter-relation with other materials.
For buyers looking to source soda ash domestically and avoid costly transportation costs, the market is not in their favor.
"The soda ash suppliers in the U.S. would rather export soda ash than sell it domestically because they can get more money by exporting the material," one soda ash buyer in the Midwest tells Purchasing.com. As a result, this buyer says it is difficult to get competitive soda ash pricing from U.S. suppliers because in many instances, the suppliers really don't want the U.S. business.
"The U.S. suppliers seem to keep with their current customers and not try to add any additional business. It is kind of a ‘take it or leave it' kind of relationship."
It's not just that buyer's imagination. On its second quarter earnings call, officials from FMC Corp. confirmed those sentiments saying "we intend to take full advantage of the low cost position of U.S. production to focus on gaining global market share at attractive margins. We intend to do so primarily by acquiring new customers export markets such as Asia."
And while U.S. producers are targeting Asia, Asian soda ash producers are targeting U.S. buyers. According to a recent Associated Press report, Chinese soda ash exports grew 40% in the first three months of 2009 vs. the same period last year. "They're exporting quite a bit more, and what they're doing in the process is lowering the sales price on the export market, which then makes it very difficult for the United States to compete," said Dennis Kostick, a senior minerals commodities specialist with the USGS, in the Associated Press report.
But while domestic demand for soda ash from some of its major end-market industries including glass and detergents is down, producers are also scaling back soda ash production in the U.S. drastically. According to the latest data from the US Geological Service, for example, "global economic problems have reduced world soda ash consumption, which in turn has reduced U.S. soda ash exports. To avoid an oversupply of soda ash inventories, domestic soda ash production has been cut back intentionally."
FMC in the first quarter temporarily curtailed production at its Granger facility, capacity which was brought on over the last few years to supply growing export demand. And Georgia-based OCI Chemical Corp. said this week it is laying off 38 of its 400 employees at a soda ash plant near Green River, Wyo. Company officials say the layoffs are a result of weakening global demand for soda ash.
Another factor that may push soda ash prices down is its relationship to caustic soda, which has dropped off in price recently. Earlier this year, FMC officials said that when caustic soda prices are over $400, the demand for soda ash as a lower-cost substitute increases and, thus, prices for soda ash increase. But as reported by Purchasing.com recently, caustic soda prices have plunged, lessening the need for a lower-cost substitute such as soda ash.
quoted froml: Purchasing.com
