As the accumulation rate increases, the price of soda ash will gradually come under pressure
2023/10/24
Steady increase in production load
In terms of spot prices, the domestic pure alkali market has shown a weak trend, with spot prices dropping slightly. Yuanxing Energy's Alxa light alkali quotation is 2100 yuan/ton, and heavy alkali quotation is 2500 yuan/ton. In terms of futures, the recent decline in the chemical industry sector has stabilized slightly, with some varieties' centers of gravity rising. The long short strength of soda ash has fluctuated, and the long short ratio has rebounded to a three week high. As of October 20, 2023, according to market data statistics, the overall operating rate of soda ash was 90.02%, an increase of 9.35 percentage points compared to the previous month; The weekly production of soda ash was 700800 tons, an increase of 9.35% compared to the previous month. Overall, with the current production capacity and the newly added production capacity of the Alxa project, it is not difficult to maintain a weekly production capacity of over 700000 tons, and supply pressure is intensifying.
Recently, the spot price of soda ash has fallen, and the cost side performance has been strong, with corporate profits increasing month on month. As of October 20th, the profit from coal to glass was 225 yuan/ton, and the cost was 1649 yuan/ton; The profit of petroleum coke glass production is 606 yuan/ton, and the cost is 1458 yuan/ton; The profit of natural gas glass production is 317 yuan/ton, and the cost is 1873 yuan/ton. From the perspective of glass fundamentals, with a supply of over 170000 tons of daily melting and high profits, the power of glass factories to reduce production is insufficient. Only when downstream demand continues to increase can profits be maintained.
The production of glass production lines has steadily increased under the stimulation of high profits. Data shows that as of October 20th, the domestic production capacity of float glass was 170300 tons/day, an increase of 0.83% month on month and 3.65% year on year. The production capacity of photovoltaic glass was 94400 tons per day, an increase of 2.39% month on month and 39.11% year-on-year. The number of domestic float glass production lines in operation is 252, an increase of 4 compared to last month. The production of glass production lines has strong rigidity, as the cost of cold repair is very high. Once put into production, it is usually produced continuously for 8 years or even longer. The current profit situation and potential ignition production line of the industry have exceeded 170000 tons, and it is expected that glass supply will continue to increase in the second half of the year.
Inventory has rebounded for six consecutive weeks
According to data from Steel Union, as of October 20th, the total inventory of domestic soda ash manufacturers was 377300 tons, a month on month increase of 19.89% and a year-on-year increase of 19.1%. Inventory growth for six consecutive weeks reflects a gradual change in the supply and demand pattern. Under the expectation of confirmed oversupply, it is expected that inventory will continue to grow.
The profit of soda ash has declined with the decline of spot prices. As of October 20th, the production profit of domestic ammonia alkali enterprises was 1051.28 yuan/ton, a decrease of 40.47% month on month and a year-on-year increase of 22.53%; The production profit of cogeneration enterprises was 1334.1 yuan/ton, a decrease of 42.46% month on month and a year-on-year increase of 4.23%.
The main consumption of materials for the ammonia alkali method is synthetic ammonia, coal, salt, and limestone, while the main materials for the combined alkali method are coal and salt. At present, the cost has slightly rebounded month on month, but overall it is lower than the same period last year. In addition, the cost of domestic ammonia alkali enterprises was 1768.32 yuan/ton, a month on month increase of 3.21% and a year-on-year decrease of 5.86%; The cost of the joint alkali enterprise was 2093.9 yuan/ton, a month on month increase of 1.48% and a year-on-year decrease of 16.29%.
Overall, the supply pressure has intensified, with significant support for the first-line cost of 1700 yuan/ton in the short term for pure alkali, and weak prices in the medium to long term. From a fundamental perspective, the accumulation of soda ash for six consecutive weeks reflects changes in the supply and demand pattern. In addition, the gradual arrival of imports will continue to impact the spot market. At the current profit level, the possibility of enterprises actively reducing production is not high. The demand side for heavy alkali is still a rigid demand, and it is expected that the downstream replenishment demand for light alkali will gradually weaken.
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