[Chemical market under "dual control"] Soda ash prices hit a 10-year high

"Since this year, the spot price of soda ash has been raised more than 10 times, reaching a 10-year high!" The market price of soda ash has skyrocketed recently, especially since July
.

Industry insiders believe that under the background of "dual control" of energy consumption and power curtailment, the reality of soda ash production decline and the expectation of limited increase in medium-term capacity, superimposed on the demand increase brought by the demand-side photovoltaic glass production plan, and jointly pushed up the soda ash.
Price
.

Production restrictions lead to tight supply

"Affected by factors such as energy consumption'dual control' and power curtailment, soda ash companies have concentrated parking or load reduction, and the overall operating rate of the industry is not high
.

In fact, the production route of soda ash by chemical synthesis is an industry with high energy consumption and high carbon emissions
.

In August, the National Development and Reform Commission’s General Office of the National Development and Reform Commission issued the "Barometer of Completion of Energy Consumption Dual Control Targets in Various Regions in the First Half of 2021", showing that the energy intensity of nine provinces (autonomous regions) including Jiangsu, Fujian, and Guangdong did not decrease but increased in the first half of the year.
First-level early warning
.

　　On September 19, Jiangsu Province began to implement a dual reduction control plan for energy consumption, requiring enterprises to limit production according to grades, and the soda ash industry was among them
.

　　At the same time, the production capacity lost due to overhaul has also contributed to the tightening of supply in the soda ash industry
.

　　The "dual control" of energy consumption and overhauls have led to tight supply, which has already responded in terms of inventory
.

　　Incremental demand drives up

　　"Under the'dual control' of energy consumption, the high growth in demand for photovoltaic glass is more sustainable, which has brought about an increase in marginal demand and lifted the center of long-term demand growth for soda ash,
" said Zhou Ce, an analyst at Caixin Securities
.

　　According to Zhou Ce, glass is the main application field of soda ash, and 56% of China's soda ash demand comes from glass production
.

　　According to statistics, the photovoltaic glass industry will add 13,700 tons of daily melting volume in 2021, of which the leading companies Xinyi, Flat, and CSG Group plan to invest 4,000 tons, 6,000 tons, and 4,800 tons each day in 2022.

.
It is foreseeable that the capacity growth of photovoltaic glass will reach about 40% in the next 1-2 years
.
Considering that the demand for soda ash for 1 ton of glass is about 0.
2 tons on average, it means that the annual increase in photovoltaic glass will drive 800,000 to 1 million tons of new soda ash demand
.

　　In addition, the demand for lithium iron phosphate power batteries for new energy vehicles is also expected to grow rapidly
.
At present, power batteries using lithium iron phosphate as the cathode material account for about 25% of the total, second only to ternary batteries
.
Lithium carbonate is the main raw material for the production of lithium iron phosphate, and soda ash is an indispensable raw material for the production of lithium carbonate
.
1 ton of lithium carbonate will consume about 2 tons of soda ash, and lithium iron phosphate materials are gradually recognized by mainstream models due to higher cost performance and safety, and shipments gradually catch up with ternary materials
.
In August, China's lithium iron phosphate battery output accounted for more than ternary batteries
.

　　Moreover, new energy vehicles have entered the fast lane of development, with sales increasing from 12,900 in 2020 to 319,100 in August 2021, maintaining a monthly compound growth rate of more than 18%, and the demand for upstream materials will also be more obvious.

.

　　Future capacity release is limited

　　In the context of carbon neutrality, soda ash, as a product with high pollution and high energy consumption, will be greatly affected by policies such as environmental protection and energy consumption "dual control"
.
China Securities Investment Futures analysts believe that the future supply of soda ash is also very limited
.

　　Statistics show that the effective domestic soda ash production capacity will be 31.
42 million tons in 2020
.
Including the equipment put into production after the relocation, the planned new capacity this year is only 520,000 tons
.
It is reported that Inner Mongolia Sunite and Zhonghai Winbond plants plan to withdraw, and Jiangsu Lianyungang Soda Industry plans to relocate.
After the relocation, it is planned to start production in 2023.
Soda ash production capacity will not increase in the short to medium term
.
In the future, the new domestic production capacity will mainly be the 7.
8 million tons/year trona project in Alxa
.
The project has started construction in April 2021, and is expected to complete the first phase of construction in 2025 and the second phase of construction in 2027
.
Prior to this, the domestic new capacity was less, and there was even the possibility of reduction
.
In particular, as localities strengthen the control of total energy consumption and intensity of energy consumption, there may be a further impact on the production capacity of soda ash in the future.
The difficulty in approving the production capacity of ammonia-soda and soda-soda processes will further increase, and the industry will use low-energy natural soda production capacity.
Expansion-oriented
.

　　On the whole, soda ash companies currently have good profits, relatively stable operation, and the market price is likely to remain high
.
However, the current market is more sensitive to the "dual control" measures in the main production areas, and the future impact is still uncertain.
If the "dual control" measures fall short of expectations, the soda ash market may face a sharp correction
.