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October 09, 2025

Why the caustic soda market is still hot

In May this year, this newspaper analyzed the four major risks facing China's caustic soda industry with the article titled “How Long Can the Hot Caustic Soda Market Last?” However, recent reports indicate that despite economic headwinds, the domestic caustic soda market has continued to defy trends, with companies showing strong enthusiasm for expanding production capacity. **Price and Production Surge** For the first four months of the year, the domestic caustic soda market operated at a high level. Although prices declined in May due to ample supply, they stabilized in July and then rebounded sharply in 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 was priced between 640-690 yuan per ton. Meanwhile, expansion plans have not slowed. In the past three months alone, six new ion-exchange membrane caustic soda units were launched in the northwestern region, including 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). Together, these projects added nearly 1 million tons of annual production capacity. Other regions also saw new developments, such as Sichuan Gold Road (80,000 tons/year), Shandong Haihua (150,000 tons/year), Henan Kaifeng Dongda (50,000 tons/year), Shandong Xinfa (250,000 tons/year), Shanxian Lishe (10,000 tons/year), LG Bohai (240,000 tons/year), Tangshan Sanyou (100,000 tons/year), and Henan Aerospace (100,000 tons/year). According to the China Chlor-Alkali Association, by the end of October, total national output reached 14.212 million tons, up 15.8% compared to the same period last year. Industry forecasts suggest that China’s caustic soda production capacity could reach 23.71 million tons in 2007. **Demand-Driven Growth** Despite macroeconomic controls aimed at curbing high-energy industries, demand from downstream sectors like alumina, paper, chemical fiber, and pharmaceuticals has remained robust. The alumina sector, in particular, has seen a surge in activity, with production reaching 14.26 million tons from January to September — a 50% increase over the previous year. This growth has driven demand for caustic soda, supporting its price even as new production capacity came online. However, some companies still face rising costs, especially those without integrated salt-alkali systems. Although the VAT rate on industrial salt was reduced from 17% to 13%, the market price hasn’t dropped significantly, and production costs continue to rise. **Regulatory Measures** In late October, the National Development and Reform Commission issued two key industry access policies targeting caustic soda and aluminum production. These measures aim to raise entry barriers, control new capacity, and prevent redundant construction. The aluminum industry requirements now require new projects to be approved by the State Council, with minimum capacities of 800,000 tons and a requirement for 85% self-sourced bauxite. For the chlor-alkali sector, new caustic soda plants must have a minimum capacity of 300,000 tons per year, and no new calcium carbide-based PVC projects will be allowed unless it’s a relocation of existing facilities. With these regulations in place, the release of new caustic soda capacity is expected to slow after 2008, leading to a more stable market. **Market Stabilization** Since early November, the domestic caustic soda market has shown signs of stabilization. Prices have even begun to decline in certain regions, particularly in East China. In Shandong, the ex-factory price for 30% diaphragm base fell to 560-580 yuan, while 32% ion-exchange membrane base was priced at 680-700 yuan. In Jiangsu, the prices were slightly lower at 520-530 yuan for 30% diaphragm base and 580-600 yuan for 32% ion-exchange membrane base. These developments signal a shift in the market, with regulatory controls beginning to take effect and supply gradually catching up with demand.

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