SunSirs: The Caustic Soda Market Review for 2025 and Outlook for 2026

In 2025, the Chinese caustic soda industry standed at a crossroads of scale expansion and quality transformation, with multiple conflicting factors at play. That year, caustic soda production capacity surpassed 53 million tons, and weekly output repeatedly reached new historical highs. However, downstream demand remained weak, with limited demand from the core aluminum oxide industry and sluggish growth in non-aluminum sectors, leading to a continuous intensification of the supply-demand imbalance.

According to data from SunSirs, the price of caustic soda was relatively strong in the first quarter of 2025, consolidated in the second and third quarters, and declined weakly in the fourth quarter. The average market price at the beginning of the year was 827 RMB/ton, and at the end of the year it was 738 RMB/ton, representing a price decrease of 10.76%. The highest price of the year was 1,015 RMB/ton on February 5th, and the lowest price occurred at the end of the year, at around 738 RMB/ton. The annual comparison chart for caustic soda shows that the price in 2025 was relatively low, at a historically low level.

According to the monthly candlestick chart for caustic soda, 2025 saw fewer months of price increases and more months of price decreases. The largest increase was in January, reaching 20.31%, while the largest decrease was in November, at 6.92%.

2025 Caustic Soda Market Review: According to data monitored by SunSirs, caustic soda prices rose and then fell in the first quarter. The average market price at the beginning of the year was 827 RMB/ton, rising to 907 RMB/ton at the end of the first quarter, a price increase of 9.67%. In the second quarter, prices rose and then fell again. The average market price at the beginning of April was 887 RMB/ton, falling to 835 RMB/ton at the end of June, a price decrease of 5.86%. In the third quarter, the average market price at the beginning of the month was around 833 RMB/ton, and at the end of the month it was 832 RMB/ton, a price decrease of 0.12%. Caustic soda prices continued to fall throughout the fourth quarter.

At the beginning of the year, caustic soda prices mainly rose, driven by active stockpiling from downstream industries and low inventory levels at caustic soda producers. However, prices declined in February, primarily due to downstream industries still having sufficient stock after the Spring Festival and falling alumina prices, which reduced profitability. A temporary small increase in caustic soda prices occurred in early March due to maintenance-related production cuts at caustic soda plants. Entering the second quarter, prices declined mainly due to weak downstream demand. In May and June, the market showed mixed trends, mainly consolidating, with alumina companies lowering their purchase prices, and some regions following suit due to regional influences. After a slight dip in June, prices rose again, mainly because alumina companies lowered their purchase prices for caustic soda during this period. However, in late June, market prices rebounded slightly due to supply disruptions caused by maintenance. Entering the third quarter in July, caustic soda prices initially rose before stabilizing. This was mainly due to increased demand from chlor-alkali plants, but as prices rose, downstream resistance led to price consolidation. In August, the supply-demand imbalance eased somewhat, and caustic soda prices increased. In September and October, prices declined, mainly due to the recovery of supply and weaker-than-expected demand growth. Entering the fourth quarter, caustic soda prices continued to fall, driven by a combination of negative factors.

The price of caustic soda in 2025 fluctuated, with an overall weaker trend, due to the following reasons:

1. Weak cost support

In the long term, cost factors provided insufficient support for caustic soda prices. The two main components of caustic soda production costs are raw salt and electricity, with raw salt accounting for 25% and electricity for 50-60%. However, price fluctuations for raw salt and electricity were limited in 2025, resulting in weak overall support for caustic soda prices.

2. Downstream release of production capacity was limited

The demand for caustic soda mainly includes two categories: the first category is the chemical industry (alumina accounting for 30-40%), and the second category is non-aluminum demand from industries such as papermaking, food, water treatment, artificial fibers, metallurgy, and soap. As a major downstream product of caustic soda, alumina saw approximately 11 million tons of new capacity added by 2025. However, due to factors such as tight bauxite supply, the actual production of alumina was limited. While approximately 2.1 million tons of new caustic soda capacity by 2025, this had not led to a significant increase in actual caustic soda production, thus failing to change the existing overcapacity situation in the caustic soda market.

3. Capacity expansion solidified the oversupply situation

By the end of 2025, total production capacity reached 53.21 million tons, with actual production exceeding 42 million tons, representing a year-on-year increase of approximately 3.5%. In 2025, new caustic soda capacity amounted to 4.8 million tons, with a net increase of 4 million tons. Overall supply exceeded demand, with approximately 3 million tons of inventory carried over. The contradiction between caustic soda capacity expansion and weak demand was prominent in 2025, and the integrated chlor-alkali production and regional cost differences further solidified the oversupply situation.

4. High operating rate: The operating rate remained at 80-90% throughout 2025, resulting in a good market supply.

5. The hedging effect of export volume was limited

China has ample caustic soda production capacity and low dependence on imports. Import and export data showed significant export growth and consistently low import volumes. According to customs data, in November 2025, China's liquid caustic soda exports reached 183,228.37 tons, a year-on-year decrease of 20.29% and a month-on-month decrease of 44.90%; cumulative exports from January to November totaled 3,127,615.19 tons, a year-on-year increase of 35.73%. Customs data also shows that in November 2025, China's liquid caustic soda imports were 44.49 tons, a year-on-year increase of 198.84% and a month-on-month increase of 7.58%; cumulative imports from January to November totaled 383.3 tons, a year-on-year decrease of 93.92%. Although export volumes were considerable, their offsetting effect was limited compared to the vast production capacity.

The outlook for caustic soda prices in 2025 is not ideal, with the core market conflict stemming from the mismatch between capacity expansion and demand growth. China accounts for over 45% of global production, firmly holding its position as the world's largest producer of caustic soda, with weekly output repeatedly reaching historical highs. Actual alumina production was limited, and demand growth in other downstream sectors such as papermaking and viscose staple fiber was also limited. Throughout the year, the increase in caustic soda market demand was less than the increase in supply, resulting in a persistent state of oversupply. 2025 was a year of "consolidation" for the industry's oversupply situation, and the contradiction between the inertia of capacity expansion and weak demand is difficult to fundamentally reverse in the short term..

Market Outlook

So how will caustic soda prices evolve in 2026?

Supply perspective

In 2026, China plans to add 2.19 million tons of caustic soda production capacity, representing a growth rate of 4.3%. According to incomplete statistics, China's effective caustic soda production capacity will reach 56.5 million tons in 2026, an increase from 53.21 million tons in 2025. Production is expected to be 47.2 million tons. Overall, the supply of caustic soda in the market is expected to remain ample, which will put significant pressure on sales. Therefore, caustic soda prices are expected to continue to face downward pressure.

Demand Growth Slows Down

Demand growth is expected to slow down overall in 2026. Specifically, for alumina, new capacity will be approximately 6.9 million tons (lower than the 8 million tons in 2025), corresponding to a maximum increase in caustic soda demand of approximately 1.035 million tons. In non-aluminum demand, new pulp capacity will be 1.3 million tons (a decrease of 700,000 tons year-on-year), corresponding to a maximum increase in caustic soda demand of 104,000 tons; lithium hydroxide is expected to add 150,000 to 200,000 tons; and the increase in other sectors will be relatively limited.

Inventory levels remain under pressure.

In 2025, company inventories generally operated above 400,000 tons, with peaks reaching 500,000 tons. Entering 2026, with the commissioning of new facilities, inventory pressure is expected to increase significantly, with a higher probability of exceeding 450,000 tons for most of the year. Based on these supply-side factors, long-term supply pressure in the caustic soda market is expected to persist.

Pay attention to changes in government policies

Policy dynamics are becoming a significant potential variable influencing prices. At the end of 2025, the Ministry of Industry and Information Technology proposed an "anti-overcapacity" policy aimed at eliminating outdated production capacity, which again attracted market attention before the New Year. According to statistics, the caustic soda industry will be a key focus of this policy, with approximately 6 million tons of capacity from outdated facilities that had been operating for over 20 years. If the policy is effectively implemented, it could improve the industry's supply-demand balance by reducing supply. Close attention should be paid in 2026 to whether this policy will continue to be promoted and truly implemented.

In 2026, caustic soda prices are expected to follow a volatile but generally downward trend, with the overall price level shifting lower. While there may be temporary rebounds due to supply-demand imbalances or policy expectations, these are unlikely to alter the long-term oversupply situation. The key variables will be the effectiveness of "anti-overcapacity" policies and the pace at which production cuts are implemented across the industry chain. If neither of these sees substantial progress, prices could fall to their lowest levels in recent years.

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