July Market Information of Sodium Carbonate in China

Article source:  China Chemical Industry News

Author: Wang Hongzhen

Soda ash prices have stabilized since late July. Xu Bin Hua, an analyst at Longzhong Information, explained, “As companies that underwent maintenance earlier have gradually resumed production, market supply has increased. Combined with a cooling of macroeconomic expectations, the soda ash market has gradually returned to being driven by fundamentals.”

Supply Pressure Persists

Recently, the domestic soda ash market has seen a decline in overall supply due to unexpected production cuts at some facilities. According to data from Longzhong Weekly, as of July 31, weekly soda ash production stood at 699,800 tons, a decrease of 24,000 tons from the previous week, representing a 3.32% decline.

Market dynamics indicate that the current contraction in soda ash supply may not be sustainable. It is reported that multiple soda ash facilities plan to resume production in early August. Statistics indicate that daily soda ash production in August is expected to remain around 105,000 tons, with weekly production projected to increase to 733,600 tons.

Regarding new capacity, domestic soda ash production capacity has already exceeded 2 million tons this year, with an additional 3.5 million tons of new capacity planned for release in the second half of the year. Future supply pressures may gradually emerge.

In terms of inventory, as of the week ending July 31, total inventory at domestic soda ash manufacturers decreased to 1.7958 million tons compared to the previous week. However, the inventory reduction was not due to actual market consumption growth but rather a shift to traders' warehouses through order execution, with manufacturer inventory converting to social inventory.

Analysts point out that as the capacity of restarted plants is gradually released, coupled with high social inventory levels, supply pressure in the soda ash market may increase in the future.

Prices remain under pressure

Soda ash futures and spot traders signed a large number of contracts in advance and sold off in the futures market, resulting in an increase in pending orders for some soda ash manufacturers, with new order prices generally rising by 50 to 150 yuan. Against this backdrop, futures and spot traders saw risk-free arbitrage opportunities, so they purchased large quantities of spot goods from manufacturers while conducting sell hedging operations in the futures market to lock in profits.

From the futures price perspective, on August 3, the main contract for soda ash futures on the Zhengzhou Commodity Exchange (ZCE) closed at 1,247 yuan, down 161 yuan from 1,408 yuan on July 24. This decline clearly indicates that the soda ash futures market faced significant downward pressure during this period.

Demand remains lackluster

"Overall soda ash demand remains lackluster. Specifically, photovoltaic glass production capacity continues to decline, weakening demand for heavy soda ash. It is expected that production capacity for float glass and photovoltaic glass will remain stable next week; the daily glass market has shown weak trends recently, with poor profitability for manufacturers; soda ash manufacturers operate at approximately 80% capacity, with some companies operating at a loss; Sodium Metabisulfite production capacity utilization is around 60%, with demand remaining lackluster; the two sodium markets are diverging, with sodium nitrite prices rising while the sodium nitrate market remains depressed." said Chen Qiusha, an analyst at Zhuochuang Information.

The core downstream market for soda ash is float glass, which accounts for 35% to 40% of total soda ash demand. Float glass is primarily used in the real estate construction sector. Latest data shows that new construction starts in the first half of the year decreased by 20% year-on-year, indicating limited growth in float glass demand in the near term and thus insufficient growth momentum for soda ash demand in this sector. Additionally, photovoltaic glass accounts for 10% to 15% of total soda ash demand, with profits in negative territory and continuing to decline, directly constraining soda ash demand in the short term and exacerbating the lackluster state of the soda ash downstream market.