Tata Chemicals' stock gains after ANSAC price hike

12 Jun 2024 , 10:56 AM

Tata Chemicals shares rose by over 2% on June 11, following American Natural Soda Ash Corporation’s (ANSAC) announcement of a $25/MT price increase effective from July 1.

At the time of writing, on June 12, shares of Tata Chemicals were trading  at ₹1130.05 which is a 1.68% gain than the previous close. The stock has gained a total of 14% in the last one year, and 1.09% since the beginning of the year.

The price hike by ANSAC could allow Tata Chemicals to also raise prices, potentially boosting revenue while maintaining competitive market positioning.

Tata Chemicals left ANSAC in December 2022, indicating independent management of its soda ash sales and distribution. Raising soda ash prices in line with ANSAC’s increase could enhance Tata Chemicals’ margins and revenue, reflecting recovery from previous low price levels caused by oversupply and weak demand.

A coordinated price increase by major players like ANSAC and Tata Chemicals suggests market stabilization, crucial for profitability and long-term investment planning.

ANSAC’s price increase applies to both non-contract and adjustable contracted soda ash sales. The price hike is in response to a tightening global soda ash supply, leading to increased demand.

Global soda ash market tightening is influenced by higher demand and potential reductions in production capacity or supply chain disruptions.

Historically, US natural soda ash prices were pressured by China’s synthetic capacity, reduced European consumption, and material flow from Europe to Asia, which increased global supply. European producers have shifted supply to Asia, heightening competition and suppressing prices.

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