Brief Report on the Development of the Caustic Soda Market in 2025: 43.75 million tons – A turning point for the caustic soda industry is approaching
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Brief Report on the Development of the Caustic Soda Market in 2025: 43.75 million tons – a turning point for the caustic soda industry. The data for 2025 is now available. The annual output reached 43.7552 million tons, a year-on-year increase of 3.73%. By the end of the year, the total capacity was 49.89 million tons, with a net increase of 990,000 tons. Monthly production continues to reach new highs, with the operation rate remaining high. The numbers are impressive, but behind those attractive figures lie concerns within the industry that they prefer not to discuss in detail. Starting with the supply side, the actual new production capacity to be put into use by 2025 will exceed 2 million tons. In the first half of the year, Shandong Hylife New Energy, Qingdao Gulf, Hubei Yihua, and Southeast Electrochemical – plants with a capacity of over 1 million tons were put into operation ； In the second half of the year, Hebei Lingang, Hebei Sanyou, and Gansu Yaowang will add another over 1 million tons. Capacity expansion is like water released from a dam – it cannot be stopped. Turning to the price curve, the futures-weighted price dropped from a high of 3,332 yuan per ton at the beginning of the year to 2,098 yuan per ton, a decline of over 1,200 yuan. Spot prices also declined simultaneously, with Shandong’s 32% ion-exchange membrane caustic dropping from 870 yuan per ton to 800 yuan per ton. The average price throughout the year was at a relatively low level historically, with few months of increase and many months of decline. On the demand side, however, there is a \"major problem\". As the largest end-use sector, alumina holds great potential; by 2025, new production capacity is expected to reach around 11 million tons, which will result in an increase in demand for caustic soda of about 1.2 million tons.
But production capacity has increased, while actual demand has not kept up. The reason lies in the ore. The use of Guinean ore has surged; this imported ore requires only one-fourth the amount of alkali compared to domestic ore. The operating rate of alumina enterprises has increased, but the demand for caustic soda has instead declined. Demand for non-aluminum materials is even less optimistic. The operating rate of viscose staple fibers once reached 89.82%, but it was already at its limit ； The operating rate in the paper industry is significantly lower than in the same periods over the past years ； The operating rate of lithium hydroxide has remained below 40% for a long time. Among printing and dyeing, chemical fibers, and water treatment, which industry is doing relatively well? The outcome of the supply-demand imbalance is reflected in inventory data. Corporate inventory remained above 400,000 tons throughout the year, with a peak reaching 500,000 tons. An inventory balance of over 3 million tons weighs heavily on us, like a sword hanging over our heads. During most periods, factory inventory was significantly higher than in the same periods of previous years. Exports represent the only bright spot; from January to September, total exports amounted to 3.0979 million tons, representing a year-on-year increase of 46.37%. Exports are expected to reach 3.84 million tons for the whole year, a year-on-year increase of 24.7%. Indonesia and Australia are the main buyers. But even these over 3 million tons poured into the global market are not enough to fill the gap created by the expansion of domestic production capacity. There is another variable worth noting: the chlor-alkali balance. In 2025, the price of liquid chlorine is expected to fluctuate between -650 and 275 yuan per ton. When the price of liquid chlorine declines, companies tend to keep the price of caustic soda relatively stable in order to maintain their profits. But such support cannot change the overall trend of the fundamentals. Looking back at these figures: production was 43.75 million tons, capacity approached 50 million tons, inventory on hand was 3 million tons, and exports amounted to 3.84 million tons. Every number tells the same story—supply is growing too fast for demand to keep up. 2025 will be the year when the oversupply situation in the caustic soda industry becomes entrenched. The contradiction between the release of production capacity inertia and weak demand became fully evident this year. Those devices that rely on a single product and a single market have been pushed to the corner.
How to have fun in 2026? First, check how many players are at the card table. New production capacity is planned for 2026; conservatively, it is estimated to be over 2 million tons, while optimistically it could approach 4 million tons. Gansu Juhua: 900,000 tons; Chongqing Jialihe: 300,000 tons; Ningbo Huanyang: 200,000 tons; Jiantao Beihai: 200,000 tons. Even if only half of it is realized, production capacity will reach 52 million tons. What’s more troublesome is that the growth rate of demand is slowing down. The newly added capacity for alumina is expected to reach 6.9 million tons, which is lower than the 8 million tons projected for 2025. This will result in an increase in demand for caustic soda by approximately 1.035 million tons. The new pulp production capacity is 1.3 million tons, a decrease of 700,000 tons compared to the previous year, with only an increase in demand of 104,000 tons. The gap between supply and demand is continuing to widen. 2026 is off to a poor start. At the beginning of March, the operating rate of caustic soda producers was 86.4%, with weekly output rising to 855,000 tons ； The cumulative production from January to February was 7.191 million tons, a year-on-year increase of 4.6%. The inventory in enterprises’ factories and warehouses amounts to 550,000 tons, which is at a high level compared to the same period over the past five years. The industry utilization rate for alumina dropped significantly to 75.7%, with companies being cautious about purchasing caustic soda and focusing on small orders for essential needs. What does this mean? Supply continues to rise, while the biggest buyers are shrinking. The \"anti-competitive competition\" policy introduced by the Ministry of Industry and Information Technology at the end of the year might be the only variable. There are approximately 6 million tons of older facilities in the caustic soda industry that have been in operation for over 20 years. If the policies are truly implemented to improve the supply-demand balance by reducing supply, there is still hope for a turnaround in 2026. However, the specific implementation efforts and timeline are not yet clear, so don’t expect too much. There are actually three paths for how things will play out in 2026. First path: Deep integration with the downstream sector. Together with alumina and viscose fiber, the products are ready to use right from the moment they leave the factory. Those who survive are the essential parts of the industrial chain that cannot be removed. The second approach: drive costs to the absolute minimum. Companies with a high degree of integration, good energy consumption control, and significant geographical advantages can withstand more rounds of price wars. Those that rely on a single product and a single market won’t survive. Third option: Keep an eye on the exit. Exports saved us in 2025; we still have to rely on them in 2026. But production capacity in Southeast Asia is also expanding, and sea freight costs are rising, so this market isn’t easy to enter. In terms of policy, we should keep an eye on two things: first, whether the “anti-involution” policies can be truly implemented, thereby phasing out those 6 million tons of outdated facilities ； Second, will continuous losses in the combined profits of the chlor-alkali industry lead to reduced production across the supply chain? If either of these two scenarios comes true, there’s still a chance for a rebound in 2026. Otherwise, it is highly likely that the price center will continue to decline. 43.75 million tons – this is the outcome for 2025, and it also marks the starting point for 2026. Amidst prosperity, hidden concerns are already emerging. Only when the tide goes out do you realize who’s been swimming naked. The gameplay in 2026 isn’t complicated—surviving is more important than anything else. Those who still fantasize about a price rebound and hope for a market recovery, wake up. This isn’t a cyclical fluctuation; it’s a structural reshaping. Either become a link in the chain, drive costs to the absolute minimum, or exit as soon as possible. There is no fourth way. There is over 3 million tons of inventory that needs to be dealt with, while over 2 million tons of new production capacity is waiting to be utilized; meanwhile, the production of alumina is still declining. This game is already in its second half. Those that will make it to 2027 are the ones that survived the harsh winter.
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