Core Viewpoint - The price of caustic soda has declined significantly since September, driven by an exacerbation of supply-demand imbalances, with supply growth outpacing demand growth [1][3]. Supply Side - Caustic soda prices fell from 2738 CNY/ton at the beginning of September to 2400 CNY/ton after the National Day holiday, marking a cumulative decline of 12.34% [1]. - The average price of 32% ion membrane caustic soda in Shandong dropped from 870 CNY/ton to 800 CNY/ton during the same period [1]. - Domestic caustic soda production capacity is expanding significantly, with production at historical highs and inventories above last year's levels [1]. - By 2025, new domestic caustic soda capacity may exceed 2 million tons, with over 1 million tons of new installations already operational in the first three quarters of 2023 [1]. - Current caustic soda inventories stand at 421,200 tons, with most periods of the year seeing inventories above 400,000 tons, indicating persistent supply pressure [1]. Demand Side - The operating rate of alumina, the largest downstream consumer (28% share), increased from 75% to 85%, providing some support to caustic soda prices [3][6]. - However, the pace of increase in operating rates has slowed, and uncertainties regarding future installations may limit expected support [3]. - Non-alumina demand, particularly from the viscose staple fiber sector, has seen an increase in operating rates to 89.82%, but further increases are unlikely [3][6]. - The paper industry’s operating rate rose from 61% to 72%, but this increase may have peaked, limiting additional demand for caustic soda [6]. Export and Cost Factors - Caustic soda exports increased significantly, with 21,350 tons exported in August and a total of 224,660 tons from January to August, a year-on-year increase of 73,000 tons [7]. - However, international conditions may hinder further export growth due to Southeast Asia's capacity expansion and rising shipping costs [7]. - The price of raw salt remains stable, but coal prices have risen, increasing production costs for caustic soda [9]. - The profit margin for the "chlor-alkali + PVC" sector remains negative at around -70 CNY/ton, which may continue to compress profits and provide some cost support for caustic soda prices [9]. Overall Market Outlook - The downward trend in caustic soda prices is likely to continue, primarily due to high supply levels [9]. - The operating rates of alumina and other non-alumina sectors are expected to stabilize or decline, maintaining the oversupply situation [9]. - Potential positive variables include environmental restrictions, seasonal maintenance, and pre-production stockpiling in the alumina sector [9].