Thank you for the shoutout SB! I appreciate that you take the time to read and answer comments.
> We don’t know enough about the soda ash market to know what caused the rise
I alao have little knowledge on soda ash. However, according to a JPM research note published Sept 1st about a Chinese glass producer, it unfortunately looks like the increase will be short lived: “Soda ash px has recently increased from ~Rmb2,100/ton towards the ~Rmb3,000/ton level, which may result in a unit cost increase of ~Rmb1.5m2 (3.2mm product, on our est.). Mgmt shares that some domestic soda ash production capacities are ramping up more slowly than expected. At the same time, imports are constrained by the shipment schedule. Mgmt expects the issue to be short term and to improve by end-Sep. Given the currently favorable s/d dynamic for solar glass, mgmt expects this to be passed through to buyers in the Sep px hike.”
In our research thus far we haven't found one answer to the large rise in the past couple months. We are digging deeper and will likely put out an article on soda ash in the near future.
Natural Resources is a great asset, comparable to TPL, but its low multiples are warranted, I think, because of the partnership structure and its tax implications for partners. I might be wrong, but the withholding taxes and other encumbrances for non-US investors decimate future returns.
Thank you for the shoutout SB! I appreciate that you take the time to read and answer comments.
> We don’t know enough about the soda ash market to know what caused the rise
I alao have little knowledge on soda ash. However, according to a JPM research note published Sept 1st about a Chinese glass producer, it unfortunately looks like the increase will be short lived: “Soda ash px has recently increased from ~Rmb2,100/ton towards the ~Rmb3,000/ton level, which may result in a unit cost increase of ~Rmb1.5m2 (3.2mm product, on our est.). Mgmt shares that some domestic soda ash production capacities are ramping up more slowly than expected. At the same time, imports are constrained by the shipment schedule. Mgmt expects the issue to be short term and to improve by end-Sep. Given the currently favorable s/d dynamic for solar glass, mgmt expects this to be passed through to buyers in the Sep px hike.”
Tian, your question led us to have very productive conversations last week. Thank you!
That info from JPM is helpful.
Question for you: how can we improve the quality of our content for readers such as yourself?
I remain curious why the big increase in soda ash prices occurred recently but cannot find an answer. Did you find one that makes sense? Thanks
Geoffrey, thanks for reaching out!
In our research thus far we haven't found one answer to the large rise in the past couple months. We are digging deeper and will likely put out an article on soda ash in the near future.
Natural Resources is a great asset, comparable to TPL, but its low multiples are warranted, I think, because of the partnership structure and its tax implications for partners. I might be wrong, but the withholding taxes and other encumbrances for non-US investors decimate future returns.