Core Viewpoint - The chlor-alkali industry, particularly in the caustic soda sector, is facing challenges due to expanding production capacity and slowing demand, necessitating the adoption of futures trading for risk management [1][3][9] Industry Overview - As of the end of 2024, China's total caustic soda production capacity is nearing 50 million tons per year, a 30% increase since 2015, making China the world's largest producer [2] - Traditional demand from key sectors like chemical fibers is stagnating or even shrinking, leading to a collision between rapid capacity expansion and slow demand growth [2] Market Dynamics - The market has experienced significant price volatility, with prices for liquid caustic soda in East China reaching a historical high of 1600 RMB/ton in 2022, only to drop below 700 RMB/ton in 2023 [2] - This volatility has resulted in substantial impacts on companies' profitability, leading to increased risks of contract breaches and inventory management issues [2][3] Role of Traders - Traders are evolving from mere market participants to risk management service providers, utilizing futures tools to enhance their business models [4][9] - Companies like Dongbo Group and Plastics Road Holdings are pioneering the integration of futures trading into their operations, creating new competitive advantages [4][5] Futures Market Impact - The introduction of caustic soda futures in September 2023 has provided a crucial tool for companies to manage price risks and stabilize profits [1][4] - Dongbo Group has reported a 20%-30% increase in domestic trade volume and a 30% increase in export volume since adopting futures trading strategies [5] Innovative Trading Models - The basis point pricing model is being promoted as a way to enhance pricing efficiency and reduce negotiation costs between buyers and sellers [7] - Companies are increasingly using futures to lock in production costs and sales profits, thereby improving their operational stability [6][8] Future Outlook - The overall proportion of basis trading in the chlor-alkali industry remains low, indicating significant growth potential [7] - The shift from adversarial trading to collaborative risk-sharing is expected to create a more resilient and efficient industry ecosystem [9]