Shouchuang Futures: Downstream demand awaits recovery, caustic soda futures prices adjust from high levels

In the spot market, Shandong’s 32% ion-exchange membrane alkali price is 682 yuan/ton, up by 12 yuan/ton from the previous trading day.
On the supply side, Tianjin’s chlor-alkali operating load has fallen significantly. In Shandong and nearby provinces, some units have reduced or suspended production. Last week, China’s caustic soda capacity utilization rate fell by 1.1 percentage points month over month, and caustic soda inventories fell by 3.8 percentage points month over month. In March, a concentrated maintenance plan for chlor-alkali units in China has been implemented, which will reduce effective supply in the industry; market expectations for caustic soda de-stocking have strengthened.
On the demand side, the Strait of Hormuz has remained under continuous blockade. The impact on ethylene-based PVC production loads from imported feedstocks abroad has carried through to caustic soda supply. Most of this chlor-alkali capacity requires direct supply for export and is concentrated in North China, which supports the highly caustic soda price in North China and further transmits it to other regions. The market expectation for growth in domestic liquid caustic soda exports is optimistic. In terms of domestic demand, recent domestic alumina operating rates have been recovering relatively slowly; new alumina units are still awaiting commissioning, and non-aluminum demand remains steady and driven by essential needs.
In short, after the earlier rally, caustic soda futures prices saw de-risking and a pullback. However, with maintenance increasing for both domestic and overseas units, expectations of tighter supply have been further strengthened. Combined with new downstream capacity that will bring incremental demand, as well as expectations for higher exports, this may limit the downside space for caustic soda futures prices. Keep an eye on changes in overseas units and the commissioning progress of downstream new capacity. (Capital Futures)