Debang Securities: Peak production of alumina is imminent, with a good outlook for caustic soda supply and demand.

Dobon Securities released a research report stating that the overall caustic soda production capacity in China is currently steadily expanding, with the domestic total capacity reaching approximately 49.21 million tons by the end of 2024. However, the future commissioning of caustic soda production capacity still has significant uncertainty, and the actual capacity increase may be lower than expected. In 2025, there will be a big year for global alumina production, considering the limited number of new caustic soda units at the same time, there is a positive outlook for caustic soda's market under the supply-demand mismatch situation. Event: According to Baichuan Yingfu, on January 3rd, the prices of liquid caustic soda in Shandong region showed an upward trend, with various specifications in Dongying, Zibo, Weifang, and Binzhou increasing by 10-20 yuan/ton compared to the previous day. Main points of Dobon Securities: Supply side: Actual capacity increase may be lower than expected China is the world's largest producer of caustic soda, with the domestic total capacity reaching approximately 49.21 million tons by the end of 2024, mainly concentrated in Shandong. Currently, the overall capacity of caustic soda production in China is steadily expanding, with a growth rate of 2%-3% in the past two years. According to Steel Union, China is expected to add 2.4 million tons of new caustic soda capacity in 2025, mainly concentrated in the fourth quarter, with limited supply increase in the first half of the year. Looking at the production situation in 2024, China actually added about 1.45 million tons of new caustic soda capacity last year, achieving only about 55% of the initial planned 2.64 million tons, mainly due to factors such as environmental policies. Therefore, the future commissioning of caustic soda production capacity still has significant uncertainty, and the actual capacity increase may be lower than expected. Demand side: Optimistic about aluminum oxide production supporting factors As an important basic chemical raw material, caustic soda is widely used in industries such as chemicals, light industry, textiles, printing and dyeing, pharmaceuticals, metallurgy, glass, enamel, and petroleum, playing an important role in the national economy. Aluminum oxide is the largest downstream application of caustic soda, accounting for about 35% of its total demand. In 2025, there will be a big year for global aluminum oxide production, with overseas aluminum oxide planning to add 5.1 million tons of capacity, mainly concentrated in India and Indonesia, which is expected to further boost domestic caustic soda export demand after production. According to Baichuan Yingfu, domestic aluminum oxide is planning to add 10.3 million tons of capacity, with an expected production of 2, 4.8, 1, and 2.5 million tons in each quarter of 2025, which is expected to continuously boost caustic soda demand in two stages of pre-production preparation and post-production consumption of caustic soda before and after the unit is put into operation. According to a caustic soda consumption calculation of 0.13 per ton of aluminum oxide, the expected production of new aluminum oxide units in the first half of the year is expected to bring an additional demand for 880,000 tons of caustic soda. Considering the limited number of new caustic soda units at the same time, there is a positive outlook for caustic soda's market under the supply-demand mismatch situation. Recommended stocks to watch: Shanghai Chlor-alkali Chemical (600618.SH), Zhejiang Jiahua Energy Chemical Industry (600273.SH), Xinjiang Tianye (600075.SH), Inner Mongolia Junzheng Energy & Chemical Group (601216.SH), etc. Risk warning: Lower-than-expected capacity release, lower-than-expected downstream demand, significant fluctuations in raw material prices, environmental policy risks, etc.