According to the Financial Associated Press on January 9 (Reporter Xiao Lianghua), due to the important downstream application of alumina being in 'the best profit period in history', caustic soda has recently stood out among chemical products. From January 2 to January 7, caustic soda Futures prices have had six consecutive increases. Among these, on January 7, the main Futures contract of caustic soda SH2505 reached a high of 3068 yuan/ton, refreshing a nearly one-year high during trading.

The strong performance of Futures may be related to expectations of new alumina production capacity coming online, the spot price of caustic soda has risen after the New Year, but the increase is not large, and there is still a significant gap from last year's high, said a relevant person in charge from Luxi Chemical Group (000830.SZ) to the Financial Associated Press. A staff member from the securities department of Shanghai Chlor-alkali Chemical (600618.SH) also stated that the current orders for caustic soda are quite full, and the downstream demand situation is relatively good.

Looking ahead to 2025, Zhang Xiao, a caustic soda Analyst from Longzhong Information, believes that based on macro, price cycles, raw materials, downstream, seasonal fluctuations, and other characteristics, it is expected that the overall trend of caustic soda prices in 2025 will be better than in 2024, with the price of 32% ion-exchange membrane alkali fluctuating between 750-1050 yuan per ton, and the average price or between 800-820 yuan/ton.

Alumina ignites the caustic soda market.

Since 2024, most basic chemical products have seen prices languishing, while caustic soda is an exception.

Producing 1 ton of alumina requires approximately 0.13-0.2 tons of caustic soda. Alumina is the largest downstream application field for caustic soda, accounting for about one-third of total caustic soda demand. In recent years, alumina production capacity has rapidly increased, and the Industry has improved, providing some support for the demand for caustic soda. A relevant person in charge from Shandong Nanshan Aluminium (600219.SH) told the Financial Associated Press that in the fourth quarter of 2024, the profit level of alumina products reached a historic high.

From the perspective of ShanDong, entering the peak season of 'golden September and silver October' in October 2024, due to the expectation of the 2 million tons of alumina being produced by Weiqiao Chuangye Limited Company this year, the company has started large-scale procurement of liquid caustic soda, and alumina companies such as Nanshan, Wenfeng, and Xinfang have also come out to purchase, leading to a tightening supply situation in the ShanDong market. At the same time, the 'silver October' market has fully manifested, with each plant's inventory remaining at low levels, and the price of 32% ion-exchange membrane alkali has risen to a new high for 2024, with ShanDong's 32% ion-exchange membrane alkali reaching 1040 yuan/ton, an increase of 41%.

Zhang Xiao stated that with the end of procurement, the price of 32% caustic soda in ShanDong began to decline, reaching a low of 740 yuan/ton. However, due to the strong demand from several large manufacturers, the southern market, and export orders, the inventory of liquid caustic soda enterprises in ShanDong remained low in the second half of the year, making it difficult to meet downstream procurement demand. This has forced upstream prices to rise, and currently, the price of 32% caustic soda in ShanDong has increased to 840 yuan/ton.

A responsible person from Luxi Chemical Group stated that the company's current quote for caustic soda is 870 yuan/ton, a slight increase from the quote of 830 yuan/ton at the end of last year, but still significantly lower than the highest quote of over 1000 yuan/ton last year.

The profitability level of related enterprises is expected to improve.

Driven by the expectation of new production capacity for alumina, the caustic soda SH2405 contract has continued to increase in position since late December 2024 and has recently reached a new high for the year.

In terms of supply, Zhang Xiao stated that from 2025 to 2029, China will add a total production capacity of 6.06 million tons of caustic soda annually, concentrated in the northwest and north China regions. There will also be some production in South China, Southwest, Central China, East China, and Northeast China. The planned production capacity is mainly expected to be operational between 2025 and 2026, gradually decreasing year by year after 2026. "Currently, the country is restricting new caustic soda projects, and it is expected that after 2026, the production capacity of caustic soda in China will maintain relatively slow growth."

In terms of demand, Zhang Xiao believes that based on the current announced downstream consumption of caustic soda, the main downstream industries such as alumina, Viscose Staple Fiber, and New energy Fund will continue to expand their capacity from 2025 to 2029, which is expected to keep the demand for caustic soda growing, with the growth rate estimated to be stronger than during the 2020-2024 cycle.

Specifically, in 2025, China is expected to establish 5 new capacities for alumina, located in South China, North China, and Northwest regions. Among them, the largest capacity is expected to be the new capacity of 2.4 million tons/year at Hebei Wenfeng New Materials Co., Ltd. expected to commence in 2025, which is anticipated to increase caustic soda consumption by 0.432 million tons/year and effectively boost the demand for caustic soda in North China and its surrounding areas.

Industry insiders believe that if the price of caustic soda products rises, it will have a positive impact on the performance of related listed companies.

In terms of production capacity, Shanghai Chlor-alkali Chemical has a caustic soda capacity of over 1 million tons, and the company expects to produce and sell over 0.8 million tons of caustic soda in the first three quarters of 2024. Tangshan Sanyou Chemical Industries (600409.SH) has an annual caustic soda output of approximately 0.48 million tons, with a capacity utilization rate of about 91%. Xinjiang Tianye has a caustic soda capacity of 0.97 million tons.

Tangshan Sanyou Chemical Industries stated at an investor communication meeting last December that the current domestic caustic soda capacity is approximately 48.5 million tons, with an expected year-on-year production growth of about 5% for the entire year. Since 2024, the overall caustic soda market has maintained a stable trend with minor fluctuations, with prices at a high level and an industry operating rate of about 86%. In 2025, supported by the growth in downstream alumina and electrolytic aluminum demand, caustic soda prices are expected to run at a high level.