China: soda ash slowdown

The previously strong growth in China“s soda ash industry has show signs of a slowdown in recent months and some manufacturers are beginning to lower their operating rates. Total production volume of…

The previously strong growth in China“s soda ash industry has show signs of a slowdown in recent months and some manufacturers are beginning to lower their operating rates. Total production volume of soda ash in China reached 17.6 million tons in 2007, an 11% gain on the previous year. Entering 2008, monthly production statistics were showing strong year-on-year climbs, reaching a peak of 22% in May. But the rate of increase began to decline from there, falling to 16% in June, 14% in July, and 11.5% in August, which included the effects of the Beijing Olympic Games held that month. The figures show a definite slowdown for soda ash production in China, reflecting a flattening in local demand for the product. In June and July, China“s production of flat glass, the major application area for soda ash, rose a mere 0.5% year on year, while that of powder detergents increased by only 5.8%, with the downward trend continuing into August. Lower domestic demand has led to higher exports, which totaled 1.31 million tons for the January-August period of 2008, up 20% from the corresponding year-ago period. This extra flow of product, together with falling ocean freight rates, brought down the Asian spot price, which fell to USD 350-400/tonne, CFR, down USD 50/tonnes from the peak, while local prices dropped below the CNY 2,100/tonne mark in August. Rising costs of energy and raw materials on top of the listless market are putting pressure on profits, triggering reduced operating rates.