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The fundamentals of caustic soda are still improving, and spot prices are still in an upward cycle
In the first two trading days of this week, caustic soda futures continued to rise, with the main contract SH2405 hitting a high of 3086 yuan/ton on Tuesday. As of the afternoon close, it was at 3040 yuan/ton, rising nearly 200 yuan/ton in the two trading days. Its strong trend is basically in line with market expectations of strong prices before the National Day holiday. During the interview, the reporter learned that due to the recent improvement of caustic soda fundamentals, spot prices are still in a period of price increase.
In the view of Shao Yanan, the person in charge of Zhongyuan Futures Chemical, the strong market situation of caustic soda is mainly due to both supply and demand being positive at the same time. Specifically, the market maintenance continues to exist, with relatively insufficient supply. The downstream aluminum oxide industry has high operating rates and production, and other downstream industries that are not aluminum oxide have also improved under the influence of the peak season of "Golden Nine Silver Ten". Coupled with the continuous destocking of enterprises, the prices of coal, electricity, and raw salt at the cost end are firm, jointly driving the market upward.
In the past two days, the prices of caustic soda futures have significantly increased, mainly driven by the spot side. "Hu Peng, a senior analyst at China CITIC Construction Investment Futures Energy Chemical, said that due to factors such as improved supply and demand relations, especially the rise in downstream operating rates, the spot prices of caustic soda have continued to rise in recent times, especially since September when the spot price has increased significantly. In addition to the positive supply and demand, the regional price difference of caustic soda and the price difference of solid liquid caustic soda in August expanded, forming a positive effect on the spot price of caustic soda in Shandong, where prices are low. In the past two weeks, Shandong's 32% liquid caustic soda has experienced the largest increase.
Taking the benchmark delivery area's Shandong spot price as an example, on Monday, the 32% liquid alkali discount price in Shandong increased by 156 yuan/ton to 2969 yuan/ton, and on Tuesday, the 32% liquid alkali discount price in Shandong increased by 47 yuan/ton to 3016 yuan/ton. The spot price in Shandong increased by about 200 yuan/ton in two days, which is consistent with the increase in futures prices.
There are certain expectations for the recent rise in spot prices, "said Dai Yifan, the head of Nanhua Futures Energy Chemical." Spot prices are relatively tight in the near future, while spot prices continue to rise. Among them, the price of Jinling has been raised to 32% alkali at 955 yuan/ton, and the purchase price of liquid alkali by alumina manufacturers in Shandong region has also increased significantly. In his view, the recent adjustment of 50 yuan/ton will continue for a period of time in the spot market.
From a fundamental perspective, there is strong support for the rise in short-term caustic soda futures prices, "Hu Peng told reporters. After a continuous decline in the first half of the year, caustic soda prices have rebounded in the near future, and downstream acceptance of caustic soda price increases is still acceptable.
The reporter learned that currently, the supply and demand structure of caustic soda has improved month on month, and the operating rate is at a neutral level. Last week, the weekly operating rate of caustic soda was 83.46%, an increase of 0.9 percentage points month on month. The prosperity of most downstream industries such as alumina, viscose staple fibers, papermaking, and chemical industry has improved, and most downstream prices have increased, profits have increased, and operating rates have increased, which is beneficial for the price of caustic soda. Taking the largest downstream alumina in caustic soda as an example, the spot price of alumina has recently increased, with an average gross profit of about 200 yuan/ton, which is the highest point in the past year. The improvement in profits has driven the weekly production of alumina to the highest point within the year.
Affected by the improvement in supply and demand relations, the inventory of liquid alkali production enterprises has decreased for 7 consecutive weeks, with the latest inventory of 271200 tons, a decrease of 11300 tons compared to the previous month and a year-on-year decrease of 4.92%. In addition, due to factors such as exchange rates, the export price of caustic soda has recently increased, and the export volume is expected to increase month on month.
At present, the core of the caustic soda spot market lies in supply reduction, opening up regional arbitrage space (including export arbitrage), and improving downstream demand month on month. "Zhang Chi, chief analyst of Guotai Junan Futures Energy Chemical, said that in terms of regional arbitrage, inventory in South China is low, but compared to the previous tense situation, the high price needs to be digested by downstream, and export prices are still continuously rising in the near future.
Comparatively speaking, the key factor that dominates the current trend of the caustic soda market is mainly the influence of the demand side. "Shao Yanan said that after a continuous upward trend for half a month, the current price has a tendency to be overvalued. In addition, the newly increased production capacity device of 600000 tons/year in Shaanxi Jintai, which is the most concerned by the market, is expected to be put into operation in late September, which may put pressure on spot and market prices. In his opinion, this is the most important market variable in the recent caustic soda market and is worth closely tracking.
From the demand side, the release of downstream alumina production capacity for caustic soda is limited, and there is currently no significant increase in demand for caustic soda. However, during the peak season of the 'Golden Nine Silver Ten', chemical demand is relatively strong, and the demand for caustic soda has increased significantly. "Wu Zhiqiao, the head of Green Dahua Futures Chemical, said that the increase in external paper pulp prices has provided strong support for the domestic market, and the tight supply of goods available for export in the pulp spot market has also led to price increases but difficult to fall.
In Wu Zhiqiao's view, the key to dominating the current trend of the caustic soda market is not only demand, but also changes in inventory. Low inventory enterprises have a strong willingness to raise prices, and they are willing to restock and stock up downstream during peak demand seasons. Moreover, caustic soda itself is a hazardous chemical and has high requirements for warehousing and delivery. A rapid recovery in supply still requires time, "said Wu Zhiqiao.
Wu Zhiqiao believes that the later stage of the caustic soda market mainly focuses on the sustainability of export demand and the situation of domestic terminal orders and production capacity deployment.
On the one hand, the tight spot market and export demand have led to low inventory, and companies have a strong willingness to raise prices. Some devices are scheduled for maintenance in the later stage, and there is an expectation of stocking demand before the holiday. On the other hand, with international energy prices continuing to rise, overseas demand gaps remain, and domestic exports may continue to reach their high levels in 2022. Therefore, the short-term caustic soda market will still be strong, "said Wu Zhiqiao, Investors can choose to long on dips or adopt a positive strategy on dips in the short term. In the medium to long term, with the subsequent increase in production capacity and the decrease in downstream operating rates in winter, the price of caustic soda may weaken. Enterprises can focus on the cost side of the variety and the switch between peak and low seasons, and use the futures market for hedging, "he said.
In Dai Yifan's view, the key to the future market for caustic soda mainly depends on two factors. Firstly, due to the recent dual strength of chlor alkali, the overall comprehensive profit of chlor alkali has expanded rapidly, and whether supply can quickly return is a core variable. Secondly, after the internal market strengthens, the export window may close, which may lead to a certain weakening of demand. "Dai Yifan believes that the balance sheet of the caustic soda market next year is quite divergent, and continuous tracking of spot prices is the most likely approach for intraday trading. However, if the market is led by spot prices, The logic of going through a regular routine during the month is more reasonable.
However, in Hu Peng's view, there are still many uncertain factors in the later stage of the caustic soda market, especially the most recent futures contract is SH2405, which is 8 months away from the delivery month.
In the view of Shao Yanan, the person in charge of Zhongyuan Futures Chemical, the strong market situation of caustic soda is mainly due to both supply and demand being positive at the same time. Specifically, the market maintenance continues to exist, with relatively insufficient supply. The downstream aluminum oxide industry has high operating rates and production, and other downstream industries that are not aluminum oxide have also improved under the influence of the peak season of "Golden Nine Silver Ten". Coupled with the continuous destocking of enterprises, the prices of coal, electricity, and raw salt at the cost end are firm, jointly driving the market upward.
In the past two days, the prices of caustic soda futures have significantly increased, mainly driven by the spot side. "Hu Peng, a senior analyst at China CITIC Construction Investment Futures Energy Chemical, said that due to factors such as improved supply and demand relations, especially the rise in downstream operating rates, the spot prices of caustic soda have continued to rise in recent times, especially since September when the spot price has increased significantly. In addition to the positive supply and demand, the regional price difference of caustic soda and the price difference of solid liquid caustic soda in August expanded, forming a positive effect on the spot price of caustic soda in Shandong, where prices are low. In the past two weeks, Shandong's 32% liquid caustic soda has experienced the largest increase.
Taking the benchmark delivery area's Shandong spot price as an example, on Monday, the 32% liquid alkali discount price in Shandong increased by 156 yuan/ton to 2969 yuan/ton, and on Tuesday, the 32% liquid alkali discount price in Shandong increased by 47 yuan/ton to 3016 yuan/ton. The spot price in Shandong increased by about 200 yuan/ton in two days, which is consistent with the increase in futures prices.
There are certain expectations for the recent rise in spot prices, "said Dai Yifan, the head of Nanhua Futures Energy Chemical." Spot prices are relatively tight in the near future, while spot prices continue to rise. Among them, the price of Jinling has been raised to 32% alkali at 955 yuan/ton, and the purchase price of liquid alkali by alumina manufacturers in Shandong region has also increased significantly. In his view, the recent adjustment of 50 yuan/ton will continue for a period of time in the spot market.
From a fundamental perspective, there is strong support for the rise in short-term caustic soda futures prices, "Hu Peng told reporters. After a continuous decline in the first half of the year, caustic soda prices have rebounded in the near future, and downstream acceptance of caustic soda price increases is still acceptable.
The reporter learned that currently, the supply and demand structure of caustic soda has improved month on month, and the operating rate is at a neutral level. Last week, the weekly operating rate of caustic soda was 83.46%, an increase of 0.9 percentage points month on month. The prosperity of most downstream industries such as alumina, viscose staple fibers, papermaking, and chemical industry has improved, and most downstream prices have increased, profits have increased, and operating rates have increased, which is beneficial for the price of caustic soda. Taking the largest downstream alumina in caustic soda as an example, the spot price of alumina has recently increased, with an average gross profit of about 200 yuan/ton, which is the highest point in the past year. The improvement in profits has driven the weekly production of alumina to the highest point within the year.
Affected by the improvement in supply and demand relations, the inventory of liquid alkali production enterprises has decreased for 7 consecutive weeks, with the latest inventory of 271200 tons, a decrease of 11300 tons compared to the previous month and a year-on-year decrease of 4.92%. In addition, due to factors such as exchange rates, the export price of caustic soda has recently increased, and the export volume is expected to increase month on month.
At present, the core of the caustic soda spot market lies in supply reduction, opening up regional arbitrage space (including export arbitrage), and improving downstream demand month on month. "Zhang Chi, chief analyst of Guotai Junan Futures Energy Chemical, said that in terms of regional arbitrage, inventory in South China is low, but compared to the previous tense situation, the high price needs to be digested by downstream, and export prices are still continuously rising in the near future.
Comparatively speaking, the key factor that dominates the current trend of the caustic soda market is mainly the influence of the demand side. "Shao Yanan said that after a continuous upward trend for half a month, the current price has a tendency to be overvalued. In addition, the newly increased production capacity device of 600000 tons/year in Shaanxi Jintai, which is the most concerned by the market, is expected to be put into operation in late September, which may put pressure on spot and market prices. In his opinion, this is the most important market variable in the recent caustic soda market and is worth closely tracking.
From the demand side, the release of downstream alumina production capacity for caustic soda is limited, and there is currently no significant increase in demand for caustic soda. However, during the peak season of the 'Golden Nine Silver Ten', chemical demand is relatively strong, and the demand for caustic soda has increased significantly. "Wu Zhiqiao, the head of Green Dahua Futures Chemical, said that the increase in external paper pulp prices has provided strong support for the domestic market, and the tight supply of goods available for export in the pulp spot market has also led to price increases but difficult to fall.
In Wu Zhiqiao's view, the key to dominating the current trend of the caustic soda market is not only demand, but also changes in inventory. Low inventory enterprises have a strong willingness to raise prices, and they are willing to restock and stock up downstream during peak demand seasons. Moreover, caustic soda itself is a hazardous chemical and has high requirements for warehousing and delivery. A rapid recovery in supply still requires time, "said Wu Zhiqiao.
Wu Zhiqiao believes that the later stage of the caustic soda market mainly focuses on the sustainability of export demand and the situation of domestic terminal orders and production capacity deployment.
On the one hand, the tight spot market and export demand have led to low inventory, and companies have a strong willingness to raise prices. Some devices are scheduled for maintenance in the later stage, and there is an expectation of stocking demand before the holiday. On the other hand, with international energy prices continuing to rise, overseas demand gaps remain, and domestic exports may continue to reach their high levels in 2022. Therefore, the short-term caustic soda market will still be strong, "said Wu Zhiqiao, Investors can choose to long on dips or adopt a positive strategy on dips in the short term. In the medium to long term, with the subsequent increase in production capacity and the decrease in downstream operating rates in winter, the price of caustic soda may weaken. Enterprises can focus on the cost side of the variety and the switch between peak and low seasons, and use the futures market for hedging, "he said.
In Dai Yifan's view, the key to the future market for caustic soda mainly depends on two factors. Firstly, due to the recent dual strength of chlor alkali, the overall comprehensive profit of chlor alkali has expanded rapidly, and whether supply can quickly return is a core variable. Secondly, after the internal market strengthens, the export window may close, which may lead to a certain weakening of demand. "Dai Yifan believes that the balance sheet of the caustic soda market next year is quite divergent, and continuous tracking of spot prices is the most likely approach for intraday trading. However, if the market is led by spot prices, The logic of going through a regular routine during the month is more reasonable.
However, in Hu Peng's view, there are still many uncertain factors in the later stage of the caustic soda market, especially the most recent futures contract is SH2405, which is 8 months away from the delivery month.
In the fourth quarter and the first half of next year, there will still be new production capacity for caustic soda, and there are signs of a slowdown in downstream alumina demand growth. The rise in spot prices of flake caustic soda, which was previously led, has slowed down. When downstream product prices are difficult to sustain, caustic soda prices will also face pressure. "Hu Peng believes that it is expected that there will be limited room for spot prices of caustic soda to rise after October, and there will be some downward expectations for spot prices from November to December. It is recommended that investors take a rational view of market valuation, and upstream enterprises actively seize the opportunity to sell hedging after the rise of spot prices, in order to lock in production profits.
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