The Changjiang Frontal Pure Alkali Industry has completed its boom cycle and entered into an expansion phase. High-cost enterprises are expected to undergo consolidation and accelerate growth.

Changjiang released a research report stating that the triggers for the opening of the past four cycles of prosperity in the soda ash industry are not the same. They were driven by demand increase (2006-2007), catalyzed by power rationing events (second half of 2010), caused by industry consolidation and supply contraction (2016-2017), and a supercycle driven by supply-demand resonance (2021). The previous cycle of soda ash prosperity has ended, and the industry is currently in an expansion period dominated by low-cost natural soda ash. Similar to the "latecomer advantage" in industries with technological iteration, the younger generation is surpassing the older generation, and high-cost enterprises are expected to be cleared out at an accelerated pace. It is recommended to pay attention to investment opportunities in leading companies with obvious cost advantages, outstanding growth prospects, and continuously increasing market share, such as Inner Mongolia Yuan Xing Energy. Soda Ash Overview: Basic and typical bulk commodity, with differentiated production processes Soda ash is an important basic chemical raw material used primarily in the production of glass, baking soda, and detergents, with end-use applications in industries such as construction materials, photovoltaics, food, and daily chemical products. From 2013 to 2023, China's apparent consumption of soda ash increased from 22.58 million tons to 31.34 million tons, with a compound annual growth rate of 3.3%. The proportion of flat glass consumption decreased from 45% in 2017 to 34% in 2023, with a gradual decrease in housing-related consumption and an increase in the proportion of photovoltaic glass from 4% to 14%. In terms of supply, the production processes of soda ash are diversified, with the low-cost natural soda ash method relying on soda resources. Raw materials and energy are the main cost components of soda ash, and resources and location are the core competitive strengths in soda ash production. Reviewing Soda Ash Prices: Versatile elasticity in supply and demand direction and structural evolution Since 2006, the domestic soda ash industry has gone through four complete cycles, with different triggers for each inflection point (the following time periods refer to the upward phase): 2006-2008: Demand growth was the core driver of the upward cycle in soda ash prosperity. The price of heavy soda ash increased from 1,350 yuan/ton in April 2006 to 2,215 yuan/ton in April 2008, a significant increase of 64.1%. The apparent consumption growth rates of soda ash in China were as high as 14.1% and 12.5% in 2006 and 2007, respectively. With the rapid weakening of demand under the subprime financial crisis, this cycle of soda ash prosperity came to an end. 2010H2-2011: Around 2010, "oversupply" was once a label for soda ash. Power rationing policy catalyzed the price increase in this cycle. In May 2010, the State Council issued a "Notice" requiring all departments to take measures to ensure the achievement of the energy-saving goals of the Eleventh Five-Year Plan. In the second half of 2010, domestic soda ash production significantly declined, leading to a significant reduction in supply and a doubling of prices for heavy soda ash within two months. However, at that time, domestic soda ash production capacity was still expanding. After the impact of power rationing policy and subsequent joint production reduction events dissipated, the industry returned to a downturn in prosperity. 2016-2017: This cycle was dominated by supply factors, with prolonged poor prosperity forcing industry consolidation and shrinking supply after new capacity approval became stricter. Due to factors such as environmental protection, supply-side reforms, and poor profitability, the industry saw continuous capacity closures between 2013 and 2015, with soda ash achieving negative growth in capacity for the first time in 2015. Capacity continued to decline in 2016, leading to an improvement in supply and demand and a return to prosperity. 2021 supercycle: Demand, supply, and cost resonate, leading to a "supercycle" for soda ash. On the demand side, there was a surge in photovoltaic glass consumption; real estate completion rebounded, leading to an increase in flat glass demand. On the supply side, from 2020 to 2022, there was limited industry capacity expansion, with Jiangsu Lianyungang Port Soda Ash Industry exiting at the end of 2021, exacerbating the supply-demand conflict. In terms of cost, coal and salt prices remained high. With multiple factors combining, this cycle was strong, leading prices to reach historical highs. Looking ahead, where will the soda ash industry and prosperity trend go? As of September 23, the price of heavy soda ash in East China had fallen to around 1,550 yuan/ton. Considering the alkali price at the bottom of the past prosperity cycles and the rise in raw material and labor costs, there may be limited room for price reductions. Looking ahead, with a significant decline in new construction areas and pressure on completions, glass profitability is poor, with short-term cold repair pressures, and the medium to long-term demand is also uncertain. While the supply and demand of soda ash is currently loose, there is still a trend of increase on the margin, and industry reshuffle and consolidation are inevitable. The significant increase in production capacity of natural soda ash is an important reason for the current downturn in prosperity and the obvious cost advantages of natural soda ash, with the process not restricted. With the increase in the proportion of domestic natural soda ash and the strengthening of the dominant position in the industry, the cost curve of the industry tends to be steeper, which is more conducive to creating a consolidation environment. Investment Recommendation: It is recommended to focus on investment opportunities in Inner Mongolia Yuan Xing Energy The triggers for the opening of the past prosperity cycles are not the same, with demand increase leading (2006-2007), power rationing events catalyzing (second half of 2010), industry consolidation and supply contraction causing (2016-2017), and a supercycle driven by supply-demand resonance (2021). The previous cycle of soda ash prosperity has ended, and the industry is currently in an expansion period dominated by low-cost natural soda ash. Similar to the "latecomer advantage" in industries with technological iteration, the younger generation is surpassing the older generation, and high-cost enterprises are expected to be cleared out at an accelerated pace. It is recommended to focus on investment opportunities in leading companies with obvious cost advantages, outstanding growth prospects, and continuously increasing market share, such as Inner Mongolia Yuan Xing Energy. Risk Warning 1. Real estate demand falls short of expectations; 2. Project construction falls short of expectations; 3. Fierce industry competition; 4. Changes in resource tax rates.