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Soda ash prices spike

Post Time:Feb 13,2009Classify:Industry NewsView:425

Demand increases during contract season sends soda ash soaring

Soda ash prices spiked nearly $30/ton last month, as its demand increases for its use as a less expensive substitute for caustic soda during contract negotiation time.

According to Purchasingdata.com, soda ash prices spiraled up to $185/net ton in January, up from the $156-$162 range it had been trading at in the fourth quarter. The percent of buyers reporting soda ash price increases spiked in November when a whopping 44% of buyers said they were expecting a soda ash price increase.

What’s behind the big run-up? One buyer tells Purchasing.com that with caustic soda prices more than doubling in 2008, buyers looking for a lower-cost alternative to cut costs in end-use applications that are seeing reduced demand, are driving up demand for soda ash.

Another soda ash buyer at a packaging firm tells Purchasing.com that because its soda ash contract comes up for renewal in January, just as demand was increasing, the contract price went sky-high. “I was not able to find any competitive pricing and had to stay with the incumbent supplier,” this buyer says.

That matches up with that supplier FMC reported in its most recent earnings call. “As long as caustic prices are above $400 per ton, the economics favor soda ash.” Purchasingdata.com has caustic soda prices in the $780 range.

FMC officials said that in North America, soda ash price increases in 2008 “varied by customer depending upon contract provisions, timing and the amount of increase previously accepted…Nevertheless contract negotiations for 2009 were even more successful. Their favorable results are attributable to the supply demand conditions in Asia…We expect to realize an average net soda ash price increase in the mid teens for short-term.”

Another factor pushing up soda ash prices in the U.S. recently is the increased demand from export markets for natural soda ash as the cost to produce synthetic soda ash increase. Marguerite Morrin, an analyst in the London office of Chemical Market Associates Inc. (CMAI), told Purchasing.com recently that soda ash prices went up in 2008 "because markets across the world were extremely tight, highlighted by a strong export market. But 2009 will probably bring a fall-off in U.S. exports of soda ash, she adds, "so there will be more product available locally and thus a more balanced market." Morrin reports that prices of soda ash have dropped steeply in Asia in recent months. That price weakness has not yet been felt in the U.S., she says, "but it will."

FMC estimates 2008 global soda ash demand grew by 2.2 million metric tons or nearly 5%. “We expect domestic demand in 2009 to be essentially level to 2008 with softness in flat glass in the construction and automotive sectors being offset by demand from caustic conversion opportunities.”

Source: Purchasing.comAuthor: shangyi

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