Correlation between the price of the hottest soda

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Correlation between soda ash price and glass price

China is the world's leading producer and consumer of soda ash. With the development of economy, the consumption of soda ash in China is increasing. After the listing of soda ash futures on December 6, 2019, its relationship with downstream product glass, including the correlation, impact, arbitrage and other analysis of the two prices, will become the focus of market attention

by the end of 2018, China's soda ash production capacity was about 32 million tons, and the heavy alkali part of soda ash was mainly used in glass production. In 2018, the heavy alkali production accounted for 49%, and there was a gradual increase trend, so the price of soda ash was related to the price of glass. Due to the large scale, high investment and strong continuity of production of soda ash and glass, it is of great significance to clarify the correlation between soda ash and glass and explore the impact of glass supply and demand on the price trend of soda ash and glass

soda ash our experimental machines are used by customers all over the country. The downstream glass accounts for about 60%, and 1 ton of glass requires 0.2 ton of soda ash, accounting for 20% - 30% of the glass cost. However, by analyzing the price trend of soda ash and glass, we can see that the cost fluctuation has little impact on the glass price in the short term, but there is a certain correlation between the two in the long-term fluctuation. As the relationship between upstream and downstream, why there is a weak correlation between soda ash and glass, we mainly analyze from the following aspects:

characteristics of production devices

after the ignition of the glass production line, the output is basically fixed, and it is difficult to make adjustments according to market demand. After the ignition of the glass production line, the service life is mostly 5-8 years, and some even as long as 10 years. There is no overhaul shutdown in the production process, and only hot repair can be carried out. Once the shutdown occurs, the glass production line is almost scrapped, and the cold repair or reconstruction cost of each glass production line reaches tens of millions to hundreds of millions of yuan. The construction cycle of glass production line is long, the investment is large, and the continuous production cycle is long. The output of the production line in production is basically fixed, and the demand for soda ash is relatively fixed. In the short term, no matter how the glass price changes, the demand for soda ash is basically unchanged. Because the strength of the National Laboratory for new materials, the national quality inspection center, the engineering (Technology) research center, the enterprise technology center and the scientific research institute has significantly improved, the glass price changes due to the changes in the real estate boom, so it is difficult to transmit to the soda ash link

of course, in the long run, the production line of the glass industry (increase or decrease in production capacity) has a certain correlation with the long-term demand expectation of downstream real estate glass, automotive glass, electronic equipment glass and so on. While the demand for real estate glass and automotive glass is expected to continue to grow in a long period of time, new glass production lines will be built and ignited. If the demand for real estate or automotive glass is expected to be depressed for a long time, some production lines will shut down, stop production, and carry out cold repair or reconstruction. In other words, the glass production line will not easily start the ignition production line or arbitrarily shut down the production line because of the temporary contradiction between supply and demand. Therefore, the glass industry has a serious passivation and delay in the price transmission of soda ash. Only when the real estate and automobile industries are high or in a continuous downturn, the glass industry will have an effect on the demand and price of soda ash

the volume of soda ash production unit is also relatively large, and it is also affected by raw salt and environmental protection, so the production capacity is basically fixed. Once the construction starts, the production line should not be placed on the floor or wet the center. Generally, the production will not stop. Moreover, the operating rate of soda ash unit is relatively high, and the output is generally not easy to adjust. In addition to the annual production and maintenance shutdown for about 10 days, generally, the output will not be adjusted due to the temporary price. Most of them adjust the proportion of light alkali and heavy alkali according to the demand and price comparison of light alkali and heavy alkali. In other words, when the glass production line increases or decreases, the supply of soda ash will not change significantly in the short term, so the price of soda ash will change correspondingly with the increase or decrease of glass production capacity in most cases

the relationship between soda ash and glass shows that the change of glass demand will not be transmitted to soda ash in the short term, and it is more based on the comparative change of glass and soda ash production capacity that affects the price of soda ash. Therefore, the linkage between glass and soda ash is not easy to occur in the spot price, and it is more the linkage of the expected production capacity of glass and soda ash in the future. Therefore, the linkage between glass and soda ash futures in recent months is not strong, but there is a certain linkage in forward contracts. In recent years, the price of soda ash fluctuates violently, and the range is larger than before. When the price of soda ash fluctuates too much, it will also have a certain impact on the price of glass

in addition, by analyzing the production and consumption structure of soda ash, the output of heavy alkali in 2018 was 12.96 million tons, an increase of 7.69 million tons compared with 2007, the heavy quality rate increased from 30% to 49%, heavy alkali accounted for half of the output of soda ash, and light alkali increased from 12.3 million tons in 2007 to 13.25 million tons in 2018, an increase of 950000 tons. It can be seen from this that the overall growth of soda ash is mainly the growth of heavy alkali output, thanks to the end of the measurement of power. Since 2008, the rapid growth of real estate has increased the demand for glass, which is then transmitted to the increase in the demand for heavy alkali, while the downstream consumption structure of light alkali has been relatively stable in the past 10 years. The heavy quality rate of soda ash production enterprises is generally 40% - 60%, which depends on the design capacity of the unit, and the higher can reach 70% - 90%

the inventory cycle is short

because the physical properties of soda ash are not particularly stable and the relative value is low, it is not suitable for long-term storage under the condition of simple storage. At the same time, the inventory cycle of soda ash production enterprises is usually relatively short, generally about 1 week or even shorter. Since most of the heavy soda in soda ash is directly transported to glass enterprises by direct selling, even the dealers are mostly intermediary sales, and the social inventory is low

although the inventory of soda ash in glass enterprises is slightly higher, about 3 weeks, to ensure the continuous production of glass production lines, because the glass production lines cannot be easily shut down, a large part of the soda ash inventory of glass enterprises is safety inventory, and the amount of operational inventory after removing safety inventory is not too large, so the effective inventory from soda ash enterprises to glass enterprises is relatively low. If the inventory changes, especially the inventory decreases, the price of soda ash will fluctuate significantly

Another factor that affects the price fluctuation of soda ash is the regional mismatch between soda ash enterprises and glass enterprises. There is only one soda ash enterprise with an annual output of 600000 tons in South China, while South China is the main sales area of glass. The demand for glass is large and there are many production lines. The demand for soda ash reaches 2million tons/year. There is a regional supply gap of 1.4 million tons every year, and soda ash needs to be transported from the north. Because the products of Southern glass enterprises are mainly Low-E glass, and the soda ash produced by ammonia alkali method is usually used for the panel glass of electronic products and household appliances, but the soda ash production enterprises of ammonia alkali method are mainly concentrated in Shandong, Hebei, Jiangsu, Qinghai and other places, which are far away from the southern coastal areas and have a long transportation cycle. Therefore, the mismatch between supply and demand of soda ash in South China is the main factor affecting the price of soda ash in South China, and factors such as transportation will also cause short-term fluctuations in the price of soda ash

on the whole, the relationship between soda ash and glass price refers to the price change caused by the short-term supply and demand of glass, which is usually not quickly transmitted to soda ash, while the change of glass capacity and soda ash capacity will have a long-term impact on soda ash price. Changes in the price of soda ash mainly have a certain impact on the cost of glass. Because soda ash accounts for a small proportion of the cost of glass, it will not affect the output of glass due to the increase in cost in the short term

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