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What is the correlation between soda ash and glass prices
2021-03-09

China is a large producer and consumer of soda ash in the world. With the development of the economy, the consumption of soda ash in China is increasing. After the soda ash futures are listed on December 6, 2019, the relationship between soda ash futures and downstream product glass, including its price correlation, influence and arbitrage, will become the focus of market attention.

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

Soda water downstream glass accounts for about 60%, and 1 ton of glass requires 0.2 tons of soda water, which accounts for 20%-30% of the glass cost. However, by analyzing the price trends of soda and glass, we can find that cost fluctuations have little effect on glass prices in the short term, but in the long run, there is a certain correlation between the two.

Although the soda ash inventory of glass companies is relatively high, it takes about three weeks to ensure continuous production of the glass production line. However, because the glass production line is not easy to stop production, a large part of the soda ash inventory of glass companies is a safety list. After the safety stock is removed, the company's inventory will not be too large, so the effective inventory between soda ash companies and glass companies is relatively low. If the inventory changes, especially if the inventory decreases, the price of soda ash will fluctuate sharply.

Another factor influencing soda water price fluctuations is the regional mismatch between soda water companies and glass companies. 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. Factors such as transportation will also cause short-term fluctuations in the price of soda ash.

In general, the relationship between soda ash and glass prices refers to price changes caused by the short-term supply and demand of glass, which are usually not transmitted to soda ash soon, and changes in glass production capacity and soda ash production capacity will have a long-term impact on the price of soda ash. Changes in the price of soda water have a certain impact on the cost of glass. Since soda occupies a small proportion in the cost of glass, the output of glass will not be affected by the increase in cost in the short term.


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