Guotai Junan Futures: May Maintenance Focus Supports Caustic Soda Market

Short-term rebound. Caustic soda futures saw a significant rebound after the May Day holiday, mainly due to concentrated maintenance on the caustic soda supply side in May, inventory destocking exceeding expectations, and the downward outlook for liquid chlorine. Regarding maintenance, the capacity involved in caustic soda maintenance in May reaches 5 million tons. If all maintenance is implemented, inventory destocking will continue. Additionally, the expected decline in liquid chlorine costs will support caustic soda. The profit loss margin in downstream epoxy propylene consumption has widened and is close to the lowest levels in recent years. Other downstream applications that consume chlorine are also generally facing profit declines, and the negative feedback from liquid chlorine demand suggests a downward adjustment expectation for liquid chlorine in the future. Once liquid chlorine prices continue to decline, caustic soda profits will be rapidly compressed, forming a low-valuation pattern. Overall, caustic soda has maintenance support in May, but high absolute inventory and futures premium will limit the market rebound strength. If maintenance proceeds smoothly, spot prices will rebound, inventories will continue to destock, and a phased positive spread trade can be considered. (Guotai Junan Futures)