Association StekloSouz of Russia turned to the largest supplier of soda ash in Russia TD Bashkhim

Prices for raw materials for glass production rose by a third.

Russian glass producers, against the backdrop of an increase in the exchange rate, faced a sharp rise in the price of soda, a raw material for their products. Its almost monopoly supplier, Bashkhim, has raised prices by almost a third in less than a year, which could be the reason for the shutdown of small factories. Major suppliers recognize the rise in prices, but do not consider it critical, noting that disruption of export deliveries due to logistics creates more problems.

In connection with the current situation, the Association StekloSouz of Russia turned to the largest supplier of soda ash in Russia, Trading House Bashkhim (a trader of the Bashkir Soda Company (BSC), which occupies a share of more than 85% in the Russian Federation) with a request to review the pricing procedure for the company's products. As noted in the letter, Russian glass factories account for more than 40% of the total consumption of soda ash produced in the Russian Federation. Now domestic industrial consumers buy soda according to the formula agreed with the FAS, tied to the export netback. But due to the devaluation of the ruble, the cost of production began to rise sharply.

Since October 2021, Bashkhim has already increased the cost of soda by a total of 10.5%, and from April 2022, products will rise in price for the third time within 16%.

“These circumstances put glass factories on the brink of shutdown,” the document says. “Many foreign consumer companies have decided to close their production in our country. Manufacturers of glass containers will suffer the most.”

The Association StekloSouz pointed out that overproduction of glass products is already obvious in the domestic market, and a decrease in production volumes and shutdown of factories will also cause a decrease in the consumption of soda ash.

According to Kommersant's sources, among large glass manufacturers, they confirm an increase in the cost of soda, which occupies about half of the cost of their products, by 16% for the second quarter of 2022 (that is, taking into account last year's rise in price, by more than 26%). They also acknowledge problems with export shipping due to supply chain disruption for both BSC and glass processors.

Some of them believe that this may result in a decrease in demand for glass within Russia. But on this issue, the opinions of market participants diverged.

One of Kommersant's interlocutors assures that now demand and supply are balanced, and only the segment of expensive complex bottles can suffer, while ordinary containers will continue to be in demand, and therefore raw materials for it. In addition, the Kommersant source notes that after the completion of the special operation in Ukraine, where three large glass factories were destroyed, a new market for Russian products may open there. At the same time, all Kommersant's interlocutors deny the critical state of glass producers and the possible closure of factories. In their opinion, problems can arise only for small producers without their own working capital. In addition, sources say, with the strengthening of the ruble, the price will go down again. The market notes that against the backdrop of problems with exports, Bashkhim and BSK will be interested in redistributing production volumes to the domestic market.

According to an expert from Gazprombank's CEP, the situation with rising prices is ubiquitous. In a market economy, manufacturers are guided by export parity in pricing, and in such conditions, with the growth of world prices and the devaluation of the ruble, a double-digit increase in the cost of products on the domestic market is natural. The expert notes that, according to Rosstat, in 2018–2021, prices for soda ash for supplies to the domestic market were not volatile and kept within 13–13.6 thousand rubles. per ton EXW without VAT. But if they have grown, the expert notes, it should be remembered that the state, which is trying to curb inflation, often recommends representatives of certain industries (where it is possible and does not entail big losses for business) to restrain the growth of domestic prices.

Source: https://www.kommersant.ru/