Soda ash prices are expected to pick up in the short term

Raw salt prices are weak

Raw salt is one of the main raw materials for producing soda ash. According to the source, it can be divided into three categories: sea salt, lake salt, and well mineral salt. In recent years, due to the release of new capacity for wells and mineral salts, the total amount of domestic crude salt has been on an increasing trend, leading to a decline in market prices, from 269 yuan on January 1 to 238 yuan in early December, a decrease of 11.5%. According to Lu Chengle, deputy manager of Yangkou Salt Field of Shandong Haihua Co., Ltd., raw salt prices have no hope of rising under the influence of smooth import channels and high domestic inventory.

At present, the northern salt sea salt has already ended in the autumn, and the amount of raw salt supply in the market has increased. Affected by the shipping pressure, the price of wells and mineral salts has changed significantly. Lu Chengle said that Haihua Group currently has 1.2 million tons of inventories of salt and soda plants. Shandong Haitian Biochemicals and Tangshan Sanyou’s inventories can also meet production needs for about four months. If new salt is listed at the end of May next year, the purchase volume of major alkali plants will be less than 2 million tons. At present, only the raw salt inventory in Weifang is several times the demand. The decline in raw material prices weakened the cost support and formed a bearish market for soda ash.

Excessive reduction in export volume

China is the world’s largest producer and consumer of soda ash and the second largest exporter. In 2002, the domestic soda ash production capacity was only 11 million tons. However, because of the high return on raw materials, capital, and technology, and the high return on investment characteristics, soda ash production capacity continues to expand. In 2013, the average operating rate of soda ash industry was 67.1%. In 2014, 1.2 million tons of potassium fertilizer in Qinghai Salt Lake and 400,000 tons of new capacity in Fuzhou Yaolong were released, and 9 million tons of new capacity was planned. The problem of overcapacity will be even more severe.

In order to ease the contradiction between domestic supply and demand, many companies hope that the products "go out." However, since domestic soda ash exporting companies do not have a strategic unified plan, they often have little or no export in the domestic market during a good time. When the market is not good, they actively plan to export, even if they are willing to compete with the export market for the sake of blood, leading to extravagance. This has not only seriously affected the credibility of export companies in the international market, but has also become a major factor constraining the stable growth of exports of soda ash. From January to October 2014, the country exported 1.414 million tons of soda ash, a year-on-year decrease of 2.76%, and the hope of reducing the contradiction between supply and demand in the domestic market was reduced.

Downstream sluggish production is limited

The largest downstream consumer market for soda ash is glass, which consumes 0.2 tons of soda ash per ton of glass. Due to the current downturn in the housing market, demand for glass has decreased. In the fourth quarter, it was the off-season sales of glass, and the pressure from factory shipments increased. Yang Hong, sales manager of Yang Xie Feng Xi, said that the glass industry is closely related to the real estate industry. Data show that in the first three quarters, the national real estate investment increased by 11.7% year-on-year, an increase of 1.6 percentage points from the first half. Of which, the area of ​​new housing starts fell by 9.3% year-on-year, and the sales area and sales volume of commercial housing also fell by nearly 10% year-on-year. These data show that the weak demand for building materials such as glass and the soda industry that is conducted to the upper reaches of the market are the shrinking and downturn of effective market demand.

In addition to weak demand, measures taken by the country to eliminate backward production capacity and adjust industrial structure also led to limited or even falling glass production, affecting the demand for raw soda ash. The specific target task for eliminating backward production capacity of flat glass during the "12th Five-Year Plan" period is 90 million weight boxes, which is an increase of 200% compared with the target task during the "Eleventh Five-Year" period. On November 17, the Ministry of Industry and Information Technology announced the list of companies that eliminated backward and surplus capacity in the industrial sector in 2014 (the third batch), which involved several glass manufacturing companies. Next year is the last year of the "Twelfth Five-Year Plan". The situation of eliminating backward production capacity will be even more severe.

Look at the aluminum products industry. In the first half of the year, China Aluminum suffered a huge loss of 4.123 billion yuan, and its net profit fell by 560% year-on-year, ranking the A-share company's new "loss-of-loss" throne. Hong Yong said that in fact, over the past five years, due to the decline in the domestic macro-economic growth, the electrolytic aluminum industry in the early period of rapid expansion has fallen into a serious overcapacity, and aluminum prices have continued to fall sharply. The leader of the domestic aluminum products industry is still so bloody, small companies naturally mourn. What's worse is that in 2014, the decline in aluminum prices did not stop and once fell to a new low of 25 years.