Sodium hydroxide

Sodium Hydroxide (Caustic Soda) Recent Market Intelligence Report

I. Market Price Dynamics
- Futures Prices: On July 17, 2026, the main caustic soda futures contract closed at RMB 1,859.0 per ton, down 2.67%.
- Spot Prices: As of July 15, 2026, the Base Price Index for caustic soda compiled by Business Network stood at RMB 643.00 per ton. Overall, spot prices have exhibited a weak trend recently; for instance, the procurement price for 32% liquid caustic soda by major downstream consumers in Shandong province fell as low as RMB 535 per ton.

II. Supply and Demand Situation
- Supply Conditions:
- The caustic soda market has long faced structural overcapacity. Domestic caustic soda capacity exceeded 53 million tons in 2025, and over 2 million tons of new capacity are scheduled for commissioning in 2026—projected annual output is expected to surpass 43 million tons.
- As of the week ending July 16, 2026, enterprise inventories stood at 547,600 tons, up 17,600 tons (a 3.32% increase) week-on-week; cumulative inventory rose by 65,600 tons (a 13.61% increase) over the past month.
- In July 2026, both planned shutdowns and restarts occurred across production facilities; some units implemented temporary shutdowns or load reductions. Caustic soda capacity utilization declined by 1.8 percentage points month-on-month to 77.8%, and weekly output dropped below 800,000 tons—though year-on-year output remains elevated.
- Demand Conditions:
- Alumina production—the largest downstream consumer of caustic soda—has seen new capacity additions in 2026; however, suboptimal profitability has constrained actual operating rates to around 80%. New capacity ramp-up has also lagged expectations, resulting in predominantly just-in-time procurement with strong downward pricing pressure.
- Non-alumina demand remains modestly supportive: Viscose staple fiber operating rates stand at approximately 87%, while hardwood pulp operating rates hover near 70%. Although overall operating rates remain acceptable, no concentrated restocking activity has emerged—procurement continues to be driven primarily by immediate needs.
- In the new-energy sector, lithium hydroxide operating rates have steadily rebounded and currently sit at ~46%, providing modest incremental demand for caustic soda. However, this growth remains insufficient to reverse the overall weak demand landscape in the near term.

III. Import/Export Situation
- In March 2026, amid Middle East geopolitical tensions causing overseas plant outages, export expectations for Chinese caustic soda strengthened—but actual export volumes remained flat month-on-month, showing no significant increase.
- With easing regional tensions and gradual resumption of overseas operations, international supply has increased, eroding China’s competitive edge. New export inquiries declined month-on-month in April–May, diminishing export support for the domestic market.

Analysis & Assessment
- Reasons for Weak Pricing: The caustic soda market confronts multiple bearish factors—including abundant supply, sluggish demand, and high inventory levels. On the supply side, chronic overcapacity and continued new-capacity rollouts sustain upward pressure on supply volumes. On the demand side, key downstream sectors such as alumina operate below full capacity, while non-alumina sectors continue procuring strictly on a just-in-time basis—failing to provide meaningful demand support. Elevated enterprise inventories further exacerbate supply-demand imbalances.
- Limited Impact from Cost Factors: Primary production costs for caustic soda comprise salt and electricity; however, the decisive factor influencing producers’ operational decisions is integrated chlor-alkali profitability. Due to the industry’s inherent “chlorine-alkali balance” constraint, when chlorine prices remain elevated, producers maintain relatively high operating rates—even if caustic soda prices are depressed—thus amplifying supply pressure.

Outlook
- Short-Term Price Trend: Caustic soda prices are expected to remain weak in the near term. While periodic supply contractions offer marginal price support, persistently high inventories and subdued demand will continue to constrain any meaningful rebound.
- Medium-to-Long-Term Price Trend: Sustained improvement in the caustic soda market’s supply-demand balance hinges on capacity rationalization and robust downstream demand growth. Over time, as industry capacity optimization progresses and downstream demand recovers, prices may stage a rebound. Nevertheless, given the severity of current overcapacity and uncertainty surrounding downstream demand recovery, any price rebound is likely to be modest in magnitude and duration.