Sodium bicarbonate market supports level pricing—for now
By Staff -- Purchasing, 4/5/2007 2:00:00 AM
Suppliers of sodium bicarbonate are eager to get prices back up where they were a couple months ago, but supply and demand balances don't give buyers much reason to pay more.
Sodium bicarbonate suppliers got a minor price increase to 23¢/lb for a couple of months late last year but the price has slipped back down to 22¢ in early 2007, as demand has been less than robust lately in key end-use sectors. And economists at Global Insight except spot prices to drop closer to 21¢ this year.
Sodium bicarbonate is a mature commodity, with sales growth typically hovering around 3% annually. So, with industrial manufacturing now softening, it's unlikely that either sodium bicarbonate or its soda ash feedstock will see the 4%–6% demand surge in 2007 originally projected by some suppliers.
A few market analysts wouldn't be surprised to see a 3% decline in demand this year. Analysts say any uptick in demand is unlikely unless there's an unexpected surge in worldwide chemical, pulp and paper processing. Analysts at Merrill Lynch & Co., for example, say that demand for paper is low which also keeps sodium bicarbonate demand and prices down.
But that view is rejected by Richard White, the marketing and sales director for specialty sodium products at FMC Corp.
"For North America, we see a continuation of 2%–3% growth this year," he says. "There is potential for growth within the animal nutrition markets and for flue gas desulphurization projects even if some other sectors are slightly weaker."
He suggests that increases in manufacturing, energy and such other supply chain costs as logistics need to be offset—"so we would expect overall market prices to rise" in coming months. Other producers project tight supply and demand balances worldwide also may push prices up again.
"Supply is tightening up," says Brad Bunnett, director of sales and marketing at Natural Soda in Rifle, Colo. "Producers in the sodium carbonate market are having to make some hard decisions about their commitment to sodium bicarbonate production given the attractive trade off of selling their bicarb feedstock into the tight soda ash market." Bunnett goes on to says that he feels that "buyers have enjoyed a favorable position at the negotiating table since the last sodium bicarbonate facility came online several years ago."
"I think those days are over. Although energy cost, freight cost, and other input cost have increased substantially over the past several years, it has been hard for producers to get needed increases to stick, given excess capacity. I believe the industry has crossed a line on production cost and buyers will find that some of the producers will be willing to turn the wick back on production given the high cost of inputs in exchange for needed margin increases. In the past, some producers have been reluctant to stick to announced price increases for fear of lost market share."
Bunnett sees "overall demand for sodium bicarbonate continuing to improve and significant growth in a few industry segments."
Chemicals Business Intelligence
02/12/2009
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