How long can the caustic soda market remain hot?

In 2006, the output of caustic soda in China ranked first in the world with 15.12 million tons. In the case of oversupply of the market, the construction of new or expanded caustic soda projects is still underway in various regions, and the energy expansion will exceed 9 million tons this year and next. Under the influence of the release of production capacity, how long can the market's explosive situation last?
The demand ignited hot market reporters on the eve of May 1st in Xi'an in China's caustic soda industry exchange meeting (Northwest District) learned that in recent years, China's chlor-alkali industry has developed rapidly, in 2001 began a new round of growth, in 2006 caustic soda production capacity of 18.1 million tons , an increase of 23% over the same period last year, the output of caustic soda was 15.12 million tons, surpassing the United States to rank first in the world.
At the same time of significant increase in production, last year's domestic caustic soda market prices unexpectedly maintained high levels of operation, presenting a rare fast-selling situation in recent years, and this booming trend continued in the first quarter of 2007. At present, the caustic soda market as a whole is good. In April of this year, the average ex-factory prices of domestic 30% and 32% ionized membranes were respectively 650-680 yuan/ton and 730-750 yuan/ton.
According to the analysis of the responsible person of the China Chlor-Alkali Industry Association, there are three major factors in the hot caustic soda market: First, the general increase in electricity prices to promote the increase in production costs, passed on to downstream users; Second, strong downstream demand, alumina, paper, chemical fiber, pharmaceuticals, daily chemical The demand for caustic soda in such industries has increased significantly. In particular, the output of alumina only increased by 64% last year alone. Third, the export trade of caustic soda is active. In 2006, China exported 1.331 million tons of caustic soda, a year-on-year increase of 56.8%. The scope of exporting countries is further expand.
Downstream Digestion Addition Capacity Driven by strong market demand, new or expanded caustic soda projects have been built in various parts of the country in recent years. It is estimated that by 2008, China's caustic soda production capacity will reach 27.19 million tons, and the two-year expansion will reach 9.09 million tons. Of these, 2.81 million tons are concentrated in the northwest region where natural resources such as coal, oil, gas, and salt are abundant, accounting for 30.9% of the country's energy expansion. In 2007 alone, the newly putative caustic soda project in the northwest region totaled 900,000 tons, with a production capacity of 2.46 million tons, accounting for one-sixth of the country's total, and it will become the major production base of China's caustic soda industry. Originally, the market was oversupply. In the next two years, more than 9 million tons of caustic soda production capacity will be released. This is not good news for chlor-alkali enterprises.
However, the reporter learned from the interview that some downstream users continue to favor the caustic soda market. People from Shanxi Branch of China Aluminum Corporation believe that last year, the domestic alumina production capacity was 18.55 million tons, the output reached 13.7 million tons, an increase of 64% from the previous year; the output of electrolytic aluminum was 9.35 million tons, an increase of 19.7%, and the electrolytic aluminum is currently under construction. The project production capacity is 4.5 million tons.
The automobile transportation industry and the electric power industry will promote the accelerated growth of domestic aluminum consumption. The output of aluminum materials is expected to grow at a high rate, and increase the consumption of primary aluminum by 1.8 million tons. Therefore, the domestic aluminum consumption outlook is still optimistic, and the strong digestion will form a support for the caustic soda market.
Maintaining the hot situation is not easy. From the current situation, the global market overcapacity and product homogeneity have made the caustic soda market more competitive. China's caustic soda industry has entered a new stage of development, but it is still far from a caustic soda producer and there is excess production capacity. Increased competition, excessive energy consumption and other unfavorable factors.
China's caustic soda industry currently shows a rapid development in the central and western regions, the scale tends to be large-scale, and the regional layout of production is different, and it faces four major risks:
First, the adjustment of national policies has brought about high production costs. Electricity costs accounted for 60% of the cost of caustic soda. In June 2006, the national electricity price rose by a total of 0.025 yuan/kWh, and the cost of tons of caustic soda grew by more than 60 yuan. As the country's efforts to supervise energy conservation and pollution reduction have increased, the cost of safety and environmental protection for caustic soda production companies has continued to increase. With these new comprehensive costs, caustic soda companies cannot completely shift downstream.
Second, the operation of the downstream industry directly determines the changes in the demand for caustic soda. The development of papermaking, alumina, textile, and pharmaceutical industries is expected to be good, but the influence of international trade friction on downstream industries cannot be ignored. The state has also adopted various means to limit the blind development of high energy-consuming and highly polluting industries such as paper and alumina.
The third is that the start of the installation depends on the balance of alkaline chlorine. The weakness in the market of liquid chlorine and downstream chlorine consumption products will have an impact on the start-up of chlor-alkali enterprises, and the commissioning of new plants will further test the market.
Fourth, although the export performance of caustic soda in China is strong, the international market has a lot of variables. With the increase in the export volume of chlor-alkali products, the number of international trade barriers encountered is also increasing.
The combination of these factors has made it difficult for China's caustic soda market to remain hot. An excessive increase in the production capacity of caustic soda will cause further intensification of the contradiction between production and demand. With the release of production capacity, industry insiders expect the price of caustic soda to decline in the second half of 2007.

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