1、 Introduction to Spot market of Caustic Soda
Caustic soda, also known as NaOH, is an important product in the chlor alkali industry. Specifically, the chlor alkali industry refers to the basic chemical raw material industry that uses electrolysis of saturated salt water to produce NaOH, Cl2, and H2, and uses them as raw materials to produce a series of chemical products. Its core products are caustic soda (NaOH solution) and polyvinyl chloride (PVC). The chlor alkali industry belongs to an important branch below industrial salt, and another branch is the pure alkali industry, including pure alkali (Na2CO3) and glass.
China's caustic soda production capacity ranks first in the world, and the supply is showing an increasing trend year by year. According to data from the China Chloroalkali Industry Association, China's caustic soda production capacity increased from 21.81 million tons to 46.58 million tons from 2007 to 2022, with an average annual growth rate of about 5.19%. During this period, China's annual production of caustic soda increased by 21.32 million tons to 39.81 million tons, with an average annual growth rate of 5.84%. The caustic soda circulating in the market is mainly divided into two forms: liquid caustic soda and solid caustic soda. In 2022, the proportion of liquid alkali production in China's caustic soda production is about 83%, while the proportion of solid alkali production is about 17%; In addition, the highest proportion of liquid alkali is 32% liquid alkali, followed by 50% liquid alkali, and the main component of solid alkali is flake alkali. Solid alkali is easy to preserve and transport, and has a larger sales radius compared to liquid alkali.
The distribution area of caustic soda production in China is relatively wide, with most provinces and cities having caustic soda production enterprises, but the production areas are mainly concentrated in East China, North China, and Northwest China. The three provinces and cities with the largest production capacity are Shandong, Inner Mongolia, and Jiangsu, accounting for approximately 26%, 9%, and 8%. In the downstream demand field of caustic soda in China, the alumina industry accounts for the largest proportion, followed by industries such as printing and dyeing, chemical fiber, chemical industry, Water Treatment, pulp and paper making, etc.
2、 Price linkage between caustic soda and alumina
As one of the important raw materials for alumina production, caustic soda has a close price linkage, mainly influenced by cost transmission mechanisms. However, it should be noted that, on the one hand, compared with Bauxite, caustic soda accounts for a relatively low proportion in the cost of alumina, and the proportion of cost side impact is relatively small. On the other hand, in the downstream consumption of caustic soda, alumina accounts for the first place, but only about one-third of the proportion. There are many downstream influencing factors for caustic soda.
By observing the historical price trends of alumina and caustic soda, it can be seen that in the long run, their operating directions are roughly the same, but in the short to medium term, they often follow completely different logic and trends. For example, after the outbreak of the epidemic in 2020, transportation was limited, and mines were delayed in resuming work, leading to a reduction in production by northern alumina enterprises, resulting in a mild rebound in alumina prices. Subsequently, due to the deterioration of the economic environment, the production of electrolytic aluminum decreased, and the price of alumina plummeted significantly. Finally, with the impact of macroeconomic policies, the price of electrolytic aluminum began to rebound and drive the price of alumina to follow suit. The price of caustic soda has been declining throughout the year, with relatively sufficient supply on the supply side, and most of the demand side being at a low operating level. The decrease in alkali consumption has caused a drag on the price of caustic soda.
3、 Aluminum oxide and black industry chain
From the perspective of cost side analysis, Bauxite accounts for the largest proportion of the cost of main raw materials for alumina production, followed by caustic soda, the former is mainly used to provide aluminum, and the latter is used to help extract aluminum. From a cost analysis perspective, there are many similarities between these three varieties and the black industry chain. On the one hand, in the production cost of steel, iron ore accounts for the highest proportion, followed by coke. On the other hand, from the perspective of production technology, the role of iron ore is to provide iron, while the role of coke is to help extract iron. Once Bauxite, caustic soda and alumina are all listed in the futures market, the price linkage among the three will be closer, even similar to the correlation of iron ore, coke and rebar. However, considering the supply and demand factors of various varieties and the differences between the two industrial chains, the correlation between caustic soda and alumina may not be as high as that between coke and threaded steel.
