China Alkali Association: The notice on the production limitation of soda industry is as follows:
Soda ash production companies:
Since January 2020, the sudden outbreak has caused serious impact on the industry's production. In the early stage of the outbreak, due to the difficulty in transportation of raw materials and products, the transportation of raw materials was difficult, the product backlog, and the industry's operating rate declined. Since March, with the alleviation of the epidemic and the improvement of transportation conditions, the industry operating rate has gradually recovered, and the current industry operating rate has reached more than 85%. However, due to the early and continuing impact of the epidemic, downstream work resumed, the operating rate declined, soda demand fell sharply, inventory increased, the product backlog was serious, prices continued to fall, capital recovery was difficult, industry benefits fell significantly, and many companies suffered losses. The industry's economy is not performing well. According to the current situation of the industry and the general tone of the Party Central Committee's adherence to the goal of steady progress, while persevering in the prevention and control of the epidemic, in order to stabilize the economic operation of the industry and reduce waste of resources, the China Soda ash Industry Association requires that soda ash production enterprises since 2020 During the period from April 18 to October 18, 2020, each enterprise will reduce production by 30% according to its soda ash production capacity, reduce the production of soda ash and ammonium chloride, reduce inventory, and promote the clearing of excess capacity to solve the problem of supply and demand. Balance contradictions, return the industry's economic operation to stability, and promote the industry's development to high quality.
Starting from May 2020, the association organizes enterprises to conduct production reduction inspections. All enterprises must strictly implement the production limit and production reduction requirements put forward by the association, and punish enterprises that do not limit production and reduce production as required.
According to preliminary statistics from Zhuo Chuang Information, the overall stock of domestic soda ash manufacturers is about 1.4 million tons (including some manufacturers' external warehouses and port stocks), an increase of 94% month-on-month and 405.52% year-on-year. As of April 10, 2020, the inventory index of major Chinese soda ash manufacturers climbed to 335.7%, which means that China's soda ash inventory pressure continues to increase.
The downstream industry weakened. As the biggest demander of soda ash, the Chinese glass industry has obviously weakened since the outbreak of the New Coronary Pneumonia epidemic since the Spring Festival. As of April 13, 2020, the China Glass Composite Index fell to 1069.23 points, a decrease of 100.57 points from the Spring Festival, or a decrease of 8.60%; the China Glass Price Index fell to 1091.58 points, a decrease of 109.67 points, or a decrease of 9.13 %; China Glass Confidence Index fell to 979.81 points, a decrease of 64.17 points compared to before the Spring Festival, a decrease of 6.15%.
Core view
The inventory of soda ash has remained at a high level since its listing, and spot prices have fallen. The pattern of oversupply of soda ash is expected to remain, and it is difficult to rely on the outbreak of demand to reach a balance. Soda ash will continue to be weak when the supply starts normally.
The demand side assumes three situations: 1. The optimistic situation: the demand side is the same as last year, and the demand side returns to the average level of previous years after the demand side gradually resumes work. 2. Neutral situation: Affected by the epidemic, the glass output maintains the status quo and will continue to maintain production; the foreign demand on the export side is slightly lower than last year. 3. Pessimistic situation: glass production is suppressed by high inventory, and the glass end has also been shut down one after another; the export end is affected by the epidemic abroad, and the resumption of work lags behind.
Soda ash is under high inventory pressure that slows down overcapacity demand. Soda plants maintain production in the short term, and downstream demand is weak, and there is no obvious upward drive. The soda ash price center of gravity shifts downward as the inventory continues to accumulate, soda ash inventory continues to be high, so that the soda ash industry association issued a production limit document. Soda ash demand-end glass is also under pressure from high inventories. The impact of overseas epidemic situation also consumes the soda ash overseas demand. The probability of future demand-side optimism is relatively small. Soda ash is still under great pressure in the case of limited production, and the price will still be suppressed by the inventory without the release of production.
