Core Viewpoint - The caustic soda futures market is experiencing a downward trend, with the main contract down by 1.91% to 2105.0 CNY/ton as of December 5 [1] Inventory and Production - As of December 4, caustic soda enterprise inventory reached 504,800 tons, an increase of 35,000 tons or 7.45% from the previous week; over the past month, inventory has accumulated an increase of 90,000 tons, representing a 21.70% rise [2] - The inventory of fixed liquid caustic soda in sample enterprises with a capacity of 200,000 tons or more reached 504,800 tons (wet tons), reflecting a month-on-month increase of 7.43% and a year-on-year increase of 79.32% [2] Market Position and Trading - As of December 4, the top 20 futures companies in caustic soda held a total of 196,700 long positions and 227,900 short positions, resulting in a long-to-short ratio of 0.86; the net position was -31,200 contracts, an increase of 2,954 contracts compared to the previous day [2] Industry Insights - According to Ruida Futures, production load in North, Central, and East China has increased, with the average capacity utilization rate for caustic soda rising; however, downstream demand remains weak, leading to high inventory levels compared to previous years [4] - Guotou Anxin Futures indicates that the caustic soda market continues to face downward pressure due to high inventory levels and insufficient downstream demand, although there is still some profit in the chlor-alkali sector [4]

Market Trends - Since the end of August, caustic soda futures prices have been on a downward trend, closing at 2343 RMB/ton as of November 6, with spot prices fluctuating between 2500-2600 RMB/ton without significant drops [1][2] - The main reasons for the continuous decline in futures prices include: a lack of significant inventory reduction during the autumn maintenance peak, a rebound in liquid chlorine prices boosting chlor-alkali plant profits, and a large number of warehouse receipts leading to pressure on speculative long positions [2][3] Supply and Production - In October, domestic caustic soda production reached 3.61 million tons, a month-on-month increase of 2.79%, with a capacity utilization rate of 83.22%, slightly down by 0.42% [7][9] - Despite maintenance affecting 771,000 tons of capacity, high operational rates have kept supply ample, with expectations of continued production increases in November [9] - The average gross profit for chlor-alkali enterprises in Shandong was 626 RMB/ton, an increase of 9.25% from the previous week [10] Demand and Inventory - The demand side shows signs of weakness, particularly in the alumina sector, where high operational rates have led to saturated inventory levels, causing a decline in caustic soda purchase prices [14][18] - By the end of October, national caustic soda inventory reached 442,600 tons, a month-on-month increase of 6.84% and a year-on-year increase of 52.42% [18] - The overall supply-demand imbalance is attributed to high capacity utilization rates above 80% and weak demand from non-alumina sectors, leading to significant inventory accumulation [18] Market Outlook - Guotai Junan Futures suggests that the high production and inventory levels of caustic soda will continue, with limited supply-demand gaps expected in the winter maintenance season [21][22] - The outlook for November indicates a continued increase in production due to short maintenance periods and high operational willingness among chlor-alkali enterprises [23] - The overall market sentiment remains bearish, with expectations of caustic soda prices continuing to fluctuate downward, although the current futures market is deeply discounted [22][24]

Core Viewpoint - The recent fluctuations in caustic soda futures prices are influenced by the decline in coal prices and limited downstream demand for high-priced caustic soda, leading to a high-level correction in the market [1][2]. Cost Factors - The primary cost for caustic soda is electricity, with coal prices experiencing a significant drop after a two-month rebound due to supply-side constraints. As of September 1, the price of Qinhuangdao thermal coal fell to 690 yuan/ton, a decrease of approximately 2% from 704 yuan/ton on August 20, marking a near three-year low [2]. - Seasonal trends indicate that electricity consumption typically peaks in mid-August, suggesting a potential decline in coal demand and further price reductions in the future [2]. Downstream Support - The caustic soda downstream market is diverse, with aluminum oxide being the largest consumer, accounting for over 30% of demand. However, increased production capacity in the aluminum oxide sector has led to oversupply, causing operational challenges and reduced profitability for producers [3][4]. - As of June 2025, the domestic aluminum oxide capacity reached 111.75 million tons/year, a year-on-year increase of 12.59%, with an operational capacity of 90 million tons/year, up 8.37% year-on-year [3]. Market Dynamics - Despite entering the peak consumption season, the aluminum oxide market is expected to remain oversupplied, limiting price increases and support for the caustic soda market [4]. - Non-aluminum downstream sectors, such as pulp and dyeing, have seen a slight recovery in operational rates, but high caustic soda prices have led to limited purchasing willingness, resulting in weak demand support [7]. Production Levels - Caustic soda production capacity has significantly increased in recent years, with weekly production levels remaining above historical averages despite lower operational rates earlier in the year [8]. - As of August 29, the capacity utilization rate for caustic soda plants with a capacity of 200,000 tons or more was 82.4%, an increase of 3.9 percentage points year-on-year [9]. - Planned maintenance in September may alleviate supply pressures, but the potential for delayed maintenance due to acceptable profit margins could impact future supply dynamics [9]. Price Outlook - The caustic soda futures market is expected to experience continued high-level fluctuations due to mixed factors, including weak cost support and limited downstream acceptance of high prices [9].