OUTLOOK ’19: European soda ash could be buoyed by EVs wave, anti-plastic sentiment

LONDON (ICIS)–Firm demand and balanced-to-tight supply are expected to continue through 2019 in the European soda ash market, with growth in certain regions and sectors anticipated to remain strong with little supply relief.

Dynamics in the European soda ash market in 2018 were somewhat unexpected.

Many participants in late 2017 anticipated that availability would lengthen substantially last year due to the ramp-up of a Kazan Soda Elektrik’s 2.5m tonne/year soda ash facility in Turkey and 2018 prices fell in Europe because of this expectation.

However, a combination of delays to the ramp-up of the fifth and final line at the site – which eventually started up in September – and material produced at the plant being exported to Asia and regions other than Europe, meant that supply did not lengthen in the European material as much as some expected.

Adding to this, tightening availability in Asia in part due to environmental regulations in China slowing or forcing to a halt some soda ash facilities in that country and firming demand in most regions of the world, led to the global market becoming tighter in H1 2018.

2019 prices are now likely to rise as no new capacity is expected to ramp up and influence European dynamics and strong demand shows little sign of stopping.

Some sellers expect demand to rise in central and eastern Europe to lead the way as new glass manufacturing lines are set to ramp up.

According to one producer, recent directives by the EU aimed at tackling plastic waste and pollution could support the market if some business are pressured to switch to glass containers and other glass products rather than difficult to recycle plastic ones.

“Fashion of glass is going up…glass bottles are again coming to the tables [and] glass is easy to recycle. [The] EU is fighting with plastics: legislation is supporting glass packaging,” a producer commented.

Glass containers and bottle manufacturing in Europe account for a large portion of the market and any incentives that favour these markets are likely to be felt by sellers of soda ash.

A second producer said growing buying appetite is also likely to come from the lithium production sector.

Lithium batteries are one of the largest consumers of lithium and some large lithium production processes require around half a tonne of soda ash to make lithium carbonate, a key precursor for lithium batteries.

“Soda ash consumption [related to] lithium production will reach over 60 kilo tonnes by 2020 [and] 120 kilo tonnes by 2025,” the producer commented.

Electric car batteries are expected to be a major driver of such production.

Soda ash is also used in the manufacturing of flat glass for car windows and the expected new surge of autonomous vehicles and electric vehicles, could also begin consume more soda ash by late 2019, adding to the bullish sentiment.

Soda ash capacity is expected to improve in the longer term. Turkish-headquartered Yildirim Holding is planning to begin construction of a new 400,000 tonne/year plant in Kazakhstan in late 2019.

However, some participants in Europe anticipate that construction will not be completed until much later, as it can take multiple years to get a plant up and running after construction actually begins.

Furthermore, soda ash availability is expected to improve in India with new capacity anticipated to ramp up.

However, according to one producer in Europe, the market in India is very tight currently and the capacity expansion is primarily for the local market and unlikely to shift global fundamentals.

Supply in key regions such as Asia could well tighten in the future if environmental regulation in China continue to restrict output during certain quarters. This could have an indirect impact on European availability, with potentially less material for buyers to import in if supply in Europe does tighten.

With demand anticipated to continue to firm and supply not likely to increase in the short term, only the risk to the market is from macro-economic factors such as a worsening of the US-China trade war and the indirect impact on Europe from the possibility of a no-deal Brexit.

Focus article by Ciaran Tyler.