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Volatile sodium bicarbonate prices may stabilize with raw materials this year

Post Time:Feb 16,2009Classify:Industry NewsView:459

The soaring raw materials and energy costs that led to inflationary pressures on sodium bicarbonate in 2008 have begun to ease up. While no one is predicting that bicarbonate prices will drop significantly any time soon, current conditions suggest that the next year could be an era of relative price stability for this chemical.

The latest round of price increases by U.S. bicarbonate producers occurred during the fourth quarter of 2008 and amounted to $40-60/ton, depending on the product grades and plants of origin. That represents a rise of 8-12%, based on the selling prices reported by Purchasingdata.com

Sodium bicarbonate producers blamed these price increases on more expensive soda ash, the principal raw material for sodium bicarbonate. Increases in that raw material over the past three years have been "pretty significant," says Pat Fiedler, vice president for specialty products at Church & Dwight in Princeton, N.J., the largest U.S. sodium bicarbonate manufacturer. At another key bicarbonate player, Solvay Chemicals, business manager David Calvo says that any economic benefits his firm has realized from cheaper energy of recent months have been "completely eclipsed by the sharp increases" in soda ash.

Soda ash prices went up in 2008 "because markets across the world were extremely tight," says Marguerite Morrin, an analyst in the London office of Chemical Market Associates Inc. (CMAI). A strong export market in 2008 is one reason soda ash supplies were particularly constricted in the U.S., she notes. 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."

The cost problem for bicarbonate producers goes beyond soda ash. Rising rates for another sodium bicarbonate raw material, carbon dioxide, coupled with "increasing mining recovery costs," are squeezing margins in the bicarbonate industry, says Richard White, director of marketing and sales at another huge bicarbonate producer, Philadelphia-based FMC Corp.

Rising energy costs, at least until they began to retreat late in 2008, have also been a headache for bicarbonate makers. Producers of bicarbonate "are not really big energy consumers in terms of the process itself," says Fiedler. But transportation is another matter. For example, Fiedler says Church & Dwight had to absorb "some increased costs" for the fuel surcharges on raw material deliveries to its Eastern U.S. center of bicarbonate production in Old Fort, Ohio That was not an issue with the company's Green River, Wyo. bicarbonate production plant, where raw materials are available nearby.

But energy has become less of a concern at the major sodium bicarbonate manufacturers since they implemented new freight policies several years ago that allow them to pass along their own higher transportation costs to their customers. Buyers of bicarbonate used to pay whatever price was stipulated in the contract, regardless of whether transportation costs surged after the contract was signed. Now their bill includes any fuel surcharges that have recently been imposed by the seller.

Last year, buyers of sodium bicarbonate in North America saw their fuel surcharge levies rise in response to run-ups in gasoline and other transportation fuels. Now that fuel rates have dipped, says Fiedler, customers are "getting a little bit of a roll-back" in those surcharges.

Whatever surcharges they may have to pay, buyers of sodium bicarbonate should be able to get all they want. "I would say that supply and demand are pretty much in balance" for bicarbonate, says Fiedler. Demand for bicarbonate "continues to increase," says Calvo, but capacity utilization remains "below 90%." White characterizes sodium bicarbonate demand as "strong across all segments."

Historically, the overall demand for sodium bicarbonate has generally paralleled the GDP, say industry sources. The average annual growth rate in sales volumes for this product in the U.S. between 2001 and 2007 was 2.6%, according to data from the American Chemistry Council.

Some segments of the bicarbonate market are expanding well above average. White says the fastest growth for the chemical is in hemodialysis, a procedure for removing waste products from the blood of patients suffering from kidney failure. Another application for sodium bicarbonate, pollution control, is a "rapidly growing market," says Calvo.

He points to the increased use of sodium bicarbonate, and a related material, sodium sesquicarbonate, to neutralize power plant emissions of acid gases such as sulfur dioxide and sulfur trioxide. Calvo says Solvay is building a plant, slated to come online early in 2010, that will produce sodium bicarbonate specifically tailored to the pollution control market.

Source: Purchasing.comAuthor: shangyi

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