On August 20, 2020, Sichuan Hebang Biotechnology Co., Ltd. issued an announcement stating that the 900,000 tons of Hou's production line will be suspended due to the flood on August 18. The price of the main soda ash futures contract SA2101 rose from the closing price of 1555 points on August 18 to 1822 points on September 3, an increase of 267 points or 17.17%. Before the listing of soda ash futures, in the second half of 2011, 2016, 2017, and 2018, due to transportation, environmental protection and other factors, the supply of soda ash was insufficient and the company’s inventory was extremely low, causing the price of soda ash to rise sharply many times , The price of soda ash in individual areas is even as high as 4800 yuan/ton. The price of soda ash has risen and fallen sharply, causing a huge shock in the industry, which has a greater impact on the stable operation of the soda ash-glass industry chain.
After the National Day, the supply of soda ash is expected to increase as Hebang Biological's 300,000-ton soda ash plant resumes production and the 900,000-ton soda plant is nearing completion. The main factors contributing to the current price of soda ash are: winter is coming, and the construction industry rushes to work causing short-term glass prices to rise; under the expectation of environmental protection and production restrictions in winter, manufacturers are reluctant to sell prices. The main unfavorable factors are: most soda ash plants resume production after overhaul, and the supply of soda ash has increased; after the off-season of glass demand in November, the glass industry's operating rate has decreased and the demand for soda ash has decreased; the ignition of glass production lines has decreased recently, and there will be more in January next year. Two production lines are planned for cold repair; after soda ash inventory has fallen to around 600,000 tons, it has increased by nearly 1 million tons again.
The current strong demand for glass has certain support for the price of soda ash, but the increase in soda ash supply and the expectation of falling demand in the future are increasingly suppressing the price of soda ash. As the temperature drops, the downward pressure on the price of soda ash will further increase until it emerges from a gradual downward trend. According to the top K-line pattern convergence pattern, the breakthrough point is 1660, and the first target for the decline is about 1 times the height of the pattern, and the current lowest is 1561, which has fallen into place, which is the upper part of the bottom dense transaction area formed in the first half of the year. The second downside target is twice the height of the pattern, and the target is at 1460, which is located at the lower part of the bottom densely traded area formed in the first half of the year.
Soda ash price and inventory have a high degree of negative correlation, and inventory changes can be used as a leading indicator of soda ash price. Manufacturers can adjust output by adjusting operating rates, maintain reasonable inventory, and stabilize product prices. In 2020, the average operating rate of the soda ash industry will drop to about 75%, with strong capacity adjustment capabilities.
There will be a significant change in the soda ash industry in 2020, that is, manufacturers often take the initiative to reduce production to meet the demand for soda ash, adjust soda ash inventory, and stabilize soda ash prices. The essence is that the industry actively arranges the scale of production according to the supply and demand relationship. Since soda ash production enterprises can use the futures price discovery function to serve their production and operation and risk management, soda ash price changes will be relatively mild in the future.
Source: Chemical Network
