In May this year, this newspaper conducted an in-depth analysis of the four major risks facing China’s caustic soda industry, under the title "How Long Can the Hot Caustic Soda Market Last?" However, recent reports indicate that despite market fluctuations, the domestic caustic soda sector has continued to show resilience, with companies maintaining strong enthusiasm for expanding production. **Price Fluctuations and Production Expansion** The domestic caustic soda market operated at a high level during the first four months of the year. Although supply was sufficient, prices began to decline in May and remained under pressure. However, a turning point occurred in July, leading to a price rebound by October. By the end of October, the average price for 32% ion-exchange membrane caustic soda ranged between 570–620 yuan per ton, while 30% diaphragm base caustic soda was priced between 640–690 yuan per ton. Meanwhile, expansion efforts in the caustic soda sector have not slowed. In just the past three months, six new ion-exchange membrane caustic soda units were launched in the northwestern region, adding nearly 1 million tons of annual capacity. These include projects such as Haiji (180,000 tons/year), Intime Chemicals (100,000 tons/year), Jilantai (180,000 tons/year), Yili Chemical (100,000 tons/year), Zhongtai Chemical (100,000 tons/year), and Tianye (320,000 tons/year). Additional projects are underway in other regions, including Sichuan Gold Road (80,000 tons/year), Shandong Haihua (150,000 tons/year), and Henan Kaifeng Dongda (50,000 tons/year). According to data from the China Chlor-Alkali Association, from January to October this year, national caustic soda output reached 14.212 million tons, up 15.8% compared to the same period last year. Industry forecasts suggest that total production capacity could reach 23.71 million tons in 2007. **Strong Demand Drives Market Growth** Despite macroeconomic controls aimed at curbing high-energy industries, the caustic soda market has shown robust growth. Analysts attribute this to increased demand from downstream sectors such as alumina, paper, chemical fiber, textiles, pharmaceuticals, and daily chemicals. The alumina industry, in particular, has been a key driver, despite being a focus of government regulation due to its energy intensity. Although energy-saving measures have intensified, some local governments continue to push forward with alumina projects, even offering illegal electricity subsidies, leading to overinvestment. From January to September, China's alumina output reached 14.26 million tons, up over 50% year-on-year, with annual projections reaching 21.5 million tons. Additionally, large-scale industries like papermaking and textile production have returned to normal after environmental issues eased, further boosting demand for caustic soda. **Upstream Challenges and Regulatory Changes** On September 1, the VAT rate on industrial salt was reduced from 17% to 13%, which is expected to benefit caustic soda producers that rely heavily on salt. However, companies without integrated salt-alkali operations remain cautious, as industrial salt prices have not dropped yet, and production costs have risen instead. Notably, areas where salt prices have increased also coincide with major caustic soda production zones. **Regulatory Measures to Control Overexpansion** Late in October and early November, the National Development and Reform Commission issued two sets of industry access conditions directly related to caustic soda. These regulations aim to raise entry barriers, standardize investments, control new capacity, eliminate outdated technologies, and prevent redundant construction. Under the "Aluminum Industry Access Requirements," new alumina projects must be approved by the State Council and must start at 800,000 tons or more, with at least 85% of bauxite sourced from self-built mines. For the chlor-alkali industry, new caustic soda plants must reach at least 300,000 tons/year, with strict requirements on layout, technology, energy use, and environmental standards. With tighter controls on high-energy and high-pollution industries, it is expected that caustic soda production capacity will grow more slowly after 2008, leading to a more stable market. Indeed, since mid-November, the domestic caustic soda market has stabilized, with prices beginning to fall in some regions. In East China, for example, 30% diaphragm base in Shandong was priced at 560–580 yuan, while 32% ion-exchange membrane base was 680–700 yuan. In Jiangsu, similar products were priced lower, at 520–530 yuan and 580–600 yuan respectively.

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