Limited Price Rise of Sodium Carbonate

Oversupply is difficult to change

In 2019, the Sodium Carbonate production capacity has again entered a long-term expansion, while the operating rate has remained high, but the demand has not been synchronized, and the oversupply situation in the market is obvious. In 2014, the sodium carbonate production capacity reached a record high of 31.35 million tons, and the production capacity was continuously reduced from 2015 to 2016. Due to the improvement in demand in 2017, the production capacity expanded again. It is expected that the capacity growth rate in 2019 will be 8.44%. During the same period, the production growth rate of sodium carbonate's major downstream flat glass was only 5.2%, which was significantly lower than the growth rate of sodium carbonate production.

From February to November 2019, the operating rate of the sodium carbonate industry was 87.06%, compared with 81.56% in the same period in 2018, a year-on-year increase of 5.5 percentage points. In December, the operating rate of the sodium carbonate industry will remain high, and partial maintenance will not affect the overall start-up. In addition, from January to October, the cumulative export of sodium carbonate was 1.179 million tons, a year-on-year increase of 0.7%, and the export was relatively stable. The production capacity has increased significantly, the operating rate has remained high, and exports and consumption are relatively stable, sodium carbonate prices are under pressure.

Destocking time may be ahead of schedule

The fourth quarter is the peak season for sodium carbonate consumption. The factory generally responds with a high operating rate and high output. When the price drops after the Spring Festival, the factory will begin maintenance and the inventory will decline accordingly. Data show that as of December 5, sodium carbonate inventory was 774,100 tons, an increase of 30,700 tons, compared with 192,200 tons in the same period last year, an increase of 619,900 tons.

At present, the sodium carbonate inventory is still in the rising channel, and is much higher than the same period last year. Against the background of high inventory and declining prices, glass companies have delayed purchases, and traders have been cautious in stocking, which has led to accelerated accumulation of inventory. In the later period, the sodium carbonate plant market will enter the destocking stage when more overhauls of equipment in the soda plant and winter replenishment of glass enterprises are opened. However, the fourth quarter of 2019 is different from previous years. The price of sodium carbonate has fallen earlier, and the time for factory maintenance may be advanced. The time for sodium carbonate destocking will also be advanced.

Loss of production at high cost plants

With the spot price falling, the profits of the sodium carbonate plant have shrunk, and some high-cost plants have even suffered losses. According to calculations, at present, the profits of Ammonia-alkali and joint-alkali factories are within 100 yuan, which is a low level since 2017. Generally, the low profit lasts for a period of time, which will stimulate the factory to overhaul in advance, or adjust the level of operating rate to achieve a rebalance of supply and demand. Among them, Shandong Haihua's 8,000-ton/day plant has been affected by environmental protection. Since December 2, production has been limited and its daily output has decreased by 1,500 tons. Sichuan Hebang's 900,000-ton/year plant has been overhauled since 4th. The equipment in Hubei Xindu is scheduled to be repaired in the past two days; the equipment in Hubei Shuanghuan is scheduled to be repaired at the end of the month. The increase of maintenance devices will help alleviate the imbalance between supply and demand in the sodium carbonate market, and also help the spot price stabilize and rebound.

Market forecast

The spot price of sodium carbonate has continued to decline since October, and is currently close to the bottom line of manufacturers, and there is little room for continued price reduction. Taking into account winter storage demand and transportation pressure at the end of the year, the price of sodium carbonate is expected to stabilize and rebound. However, the current situation of oversupply in the market as a whole has not led to a strong upward drive. Based on the above judgments, it can be expected that the price of sodium carbonate futures will continue to rebound in the short term, but time and space are limited, and investors can try to buy on dips.