First Capital Futures: Downstream demand is expected to improve, and caustic soda futures prices are rising from low levels

Spot Market: Shandong 32% Ion Exchange Membrane Caustic Soda at 589 RMB/ton, stable compared to the previous trading day.
On the supply side, last week the average utilization rate of domestic sample enterprises producing 100,000 tons or more of caustic soda was 87.8%, up 0.1 percentage points week-on-week. The inventory at factory warehouses of nationwide sample enterprises producing 200,000 tons or more of fixed liquid caustic soda was 471,400 tons (wet basis), down 9.41% week-on-week but up 2.97% year-on-year. Due to declining profits in chlor-alkali, some enterprises are considering maintenance, and it is expected that this week’s caustic soda capacity utilization will decrease to around 87.7%, with a weekly output of 854,000 tons.
On the demand side, recent reductions in alumina plant production have led to decreased demand for caustic soda, causing downstream companies to lower procurement prices. Last week, the main downstream alumina operating rate decreased by 0.8 percentage points, while viscose staple fiber capacity utilization remained flat week-on-week. However, potential capacity in the electrolytic aluminum industry is gradually starting up, and overall demand is expected to improve gradually. In summary, caustic soda remains in a high-production, high-inventory state, but the startup of downstream electrolytic aluminum capacity has sparked expectations of demand recovery, providing some support for caustic soda futures prices. Additionally, market sentiment has somewhat improved, and short-term caustic soda futures are expected to fluctuate strongly with a bias upward. Attention should be paid to changes in downstream plant operations. (First Capital Futures)