1、 Price trend

According to the Commodity Analysis System of Business Society, the price of caustic soda continued to decline in the first half of 2023, and has rebounded since September 11th. On September 11th, the average market price in Shandong was 819 yuan/ton. On September 21st, the average market price in Shandong was 996 yuan/ton, and the price increased by 21.61% in 20 days.

On the supply side

From a supply perspective, from July to August, domestic caustic soda enterprises have a large number of equipment maintenance plans, and the supply is relatively insufficient, resulting in a shortage of spot goods. In addition, the operating rate has decreased, with data showing that the operating rate of caustic soda is around 83%. The inventory of liquid alkali production enterprises has been declining for 7 consecutive weeks, with the latest inventory of 271200 tons, a decrease of 11300 tons compared to the previous month and a year-on-year decrease of 4.92%.

 
In terms of demand

From the perspective of downstream demand structure, China’s caustic soda consumption is mainly based on aluminum oxide, with the demand of the aluminum oxide industry accounting for about 31% of downstream consumption, followed by chemical industry, water treatment and medicine, papermaking, textile printing and dyeing, etc. In the first half of the year, the demand for alumina was average, but the demand for caustic soda was limited. Recently, downstream demand has increased, leading to an increase in demand for caustic soda. Recently, the spot price of alumina has increased, with an average gross profit of about 200 yuan/ton, which is the highest point in the past year. The largest downstream alumina production capacity of caustic soda is released, and the demand for chemical industry is relatively strong during the “Golden Nine Silver Ten” peak season, resulting in a significant increase in demand for caustic soda.

Analysts from Business Society believe that in the near future, from the perspective of supply and demand, the price of caustic soda has rebounded and may continue to rise in the short term. With the arrival of the “Golden Nine Silver Ten” policy, there is still a demand for stocking downstream. In addition, it is expected that there will be an additional 300000 to 400000 tons of production capacity in 2023, with an annual increase of around 2 to 2.1 million tons (see figure above). It is expected that there is still room for the spot price of caustic soda to rise after October, but the upward space is limited. With the increase of new production capacity, there may be pressure on the supply side. It is expected that the spot price will be lowered to a certain extent from November to December, depending on downstream market demand.