OUTLOOK ’20: Steady path ahead for European soda ash players

LONDON (ICIS)–European soda ash players talk of little change to market conditions in 2020 as they prepare to navigate the global economy, political tensions, and their implications for end users.

– Annual contracts steady to a touch firmer

– Margin concerns with higher costs

– Demand to remain flat

Across Europe, soda ash players typically agree pricing on an annual basis, and while many have settled for 2020, other buyers and sellers are playing a game of tug-of-war over ample supply and flat demand versus higher costs.

An announcement in August from Ciech regarding its intention to “hibernate” its 650,000 tonne/year Romanian unit in Govoro, had little effect on overall supply as this was offset against lacklustre levels of demand.

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MARGIN CONCERNS
Ciech said it has no intention of restarting the unit this year and the decision to hibernate it was made because of the termination of a deal for supplies of industrial process steam from sole supplier CET Govora.

This is just one example, sellers say, of the higher cost pressures taken on. Transportation and running expenses have been a key factor in trying to implement small increases into contracts and reduce margin pressure for 2020.

DEMAND EXPECTATIONS FLAT
Europe is expected to see more imported volumes in 2020, according to some.

Although new glass manufacturing lines were put into operation in central and eastern Europe in 2019 – and more are due in Russia this year – supply is said to be more than sufficient.

The beleaguered automotive sector did little to support the market last year, although there are signs of a slow but gradual improvement.

One key glass buyer did, however, said: “Demand for us all over the world is very weak and we do not see any improvement in the short term.”

It is further forward that sources are holding out for an improvement to buying patterns.

Soda ash is used in the manufacture of flat glass for car windows and an anticipated surge in autonomous and electric vehicle demand could also bring about an increase in consumption.

“It is the automotive business that is a little pressured,” one seller said.

“Consumption overall is growing and with reduced plastic usage, we believe that during the next five-six years, there is a quite a significant role [for soda ash] to play here.”

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

Globally, the signs are quite similar. In Asia, supply in China hinges on  environmental protection measures, although the market could find support if output is reduced.

The supply of deep-sea material is expected to remain ample in 2020.

In the US, a supply overhang is expected to linger while demand in 2020 is anticipated to be flat.

Of more general but heightened concern is news that the chemicals and oil markets face severe disruption if the US-Iran conflict escalates into a broader Middle East conflict.

On top of that, US Owens-Illinois sold its stake in Tata Chemicals in December and Poland’s Ciech reorganised its holding company into seven business units in November.

The reorganisation followed news that its Q3 net profit plunged after it had mothballed its Romanian unit.

Soda ash is used in the manufacturing of glass, detergents, chemicals and other industrial products.