Sodium Hydroxide (Caustic Soda) Recent Market Intelligence Report

I. Price Trends
- Spot Price: As of May 25, 2026, the Business Society’s benchmark spot price for caustic soda stood at RMB 620.00 per metric ton, down 1.27% from the beginning of the month and at a near-one-year low.
- Futures Prices: The Zhengzhou Commodity Exchange (ZCE) caustic soda main contract (SH609) closed at RMB 2,215 per metric ton on May 25, down 0.54% from the previous trading day; the SH607 contract (delivery month July 2026) closed at RMB 1,965 per metric ton on May 26, down 1.95%.
- Price Range in 2026: The spot price of caustic soda reached a yearly low of RMB 620 per metric ton and a high of RMB 890 per metric ton, with a median value of RMB 755 per metric ton. The current price is approaching the bottom of this range.

II. Supply-Demand Dynamics
1. Supply Side
- Persistent Overcapacity Pressure: Domestic caustic soda capacity exceeded 53 million metric tons in 2025. In 2026, over 2 million metric tons of new capacity are scheduled to come online, with total annual production expected to surpass 43 million metric tons—maintaining a structurally loose supply environment.
- Temporary Support from Maintenance Shutdowns: In May, multiple production units across Northwest, North, and East China underwent scheduled maintenance shutdowns, reducing the national operating rate to 81.2% and weekly output to 800,000 metric tons—still higher year-on-year.
- Chlor-Alkali Co-Production Constraint: Elevated liquid chlorine prices bolster chlor-alkali enterprises’ profitability, reinforcing their strong incentive to “subsidize alkali production with chlorine sales,” thereby limiting proactive output reduction.

2. Demand Side
- Weak Demand from Alumina Sector: As the largest downstream consumer of caustic soda, the alumina industry operated at ~80% capacity utilization in May. New capacity ramp-up has lagged expectations, resulting in predominantly just-in-time procurement and strong buyer-side pricing pressure.
- Divergent Non-Alumina Demand:
- Viscose staple fiber (VSF) utilization stood at 87%; hardwood pulp utilization at 70%. Overall operations remain stable, yet no concentrated restocking activity has emerged.
- Lithium hydroxide utilization rebounded to 46%, providing incremental demand for caustic soda—but insufficient to offset broad-based weakness in the near term.
- Weakening Export Support: While Middle Eastern geopolitical tensions in March briefly boosted export expectations, actual export volumes showed no significant growth. With overseas facilities resuming operations, new inquiries declined month-on-month in April–May, diminishing export support for the domestic market.

3. Inventory Pressure
- As of mid-May, sample enterprise plant inventories of liquid caustic soda totaled ~572,300 metric tons—up 47.36% year-on-year and at a multi-year high for this period.
- Post–Spring Festival downstream resumption was sluggish; inventory drawdown during the traditionally strong “Golden March–Silver April” season fell short of expectations, sustaining high inventory levels that continue to weigh heavily on pricing.

III. Market Drivers
1. Bearish Factors
- Oversupplied Market: Structural overcapacity, rapid post-maintenance output recovery, and limited willingness among chlor-alkali producers to cut output voluntarily.
- Weak Demand: Subpar alumina sector profitability constrains operating rates; non-alumina demand lacks catalysts for substantial growth; export support is fading.
- High Inventories: Plant inventories are up sharply YoY, with slow destocking progress.

2. Potential Bullish Catalysts
- Policy Constraints: Ongoing tightening of “dual carbon” (carbon peak & neutrality) and energy consumption dual-control policies is accelerating the phase-out of high-energy-consuming, outdated facilities—enhancing industry concentration.
- Cost Support: Volatility in electricity and rock salt prices may squeeze margins for small- and medium-sized producers; however, leading enterprises retain clear cost advantages.
- Maintenance Expectations: Unplanned outages due to summer heatwaves could trigger short-term supply contractions.

IV. Analysis and Outlook
1. Short Term (1–2 months)
- Price Trend: Weakness likely to persist; spot prices may test the RMB 600/ton support level, while the futures main contract could dip toward the RMB 2,000/ton threshold.
- Core Rationale: Oversupply, subdued demand, elevated inventories, and fading export support collectively deprive the market of upward momentum.

2. Medium Term (3–6 months)
- Price Trend: Range-bound trading at low levels; close monitoring warranted for signs of alumina sector profit recovery and non-alumina demand revival.
- Potential Turning Points:
- Concentrated commissioning of new alumina capacity coupled with rising operating rates could reinvigorate caustic soda demand.
- Expansion of summer maintenance scope or policy-mandated production curtailments could tighten supply.

3. Long Term (1+ years)
- Supply-Demand Outlook: Gradual improvement anticipated as industry capacity growth slows, obsolete capacity exits, and market share consolidates among top-tier players.
- Price Center: Likely to shift upward to the RMB 700–800/ton range—though explosive price surges are unlikely to recur.

V. Risk Alerts
1. Escalation of Geopolitical Conflict: Renewed volatility in the Middle East could revive export optimism, though sustainability remains uncertain.
2. Policy Implementation Pace: The speed and rigor of “dual carbon” and energy consumption control policy enforcement will directly influence the pace of obsolete capacity retirement.
3. Downstream Demand Upside Surprise: Unexpected robust demand from alumina or new-energy sectors could disrupt the current supply-demand equilibrium.