Summary: In March 2026, the global chemical supply chain faced renewed volatility due to regional conflicts. China's domestic caustic soda flakes market experienced a significant surge, with prices rising by over 12% in a single month. This article analyzes the "butterfly effect" triggered by logistics bottlenecks in the Strait of Hormuz.

1. Market Overview: Upward Price Momentum

Since early March, the domestic market for caustic soda flakes has shifted from a stable trend to a sharp upward trajectory. According to industry tracking data, as of March 24, the average market price in China reached 3,462 RMB/ton, a cumulative increase of 12.19% compared to 3,077 RMB/ton at the end of February. This rapid appreciation is a classic "externally driven" price hike rather than a result of domestic demand spikes.

2. Core Drivers: The Chain Reaction of Geopolitical Conflicts

Supply Disruptions and Order Diversion

The Middle East, particularly Iran, is a major global exporter of caustic soda flakes, with an annual capacity of approximately 1.4 million tons, primarily serving the Russian and Central Asian markets. Recent conflicts have disrupted shipping through the Strait of Hormuz, leading to large-scale supply shortages. Consequently, buyers from Australia, Southeast Asia, and India have pivoted to China. This surge in export orders has rapidly depleted factory inventories, becoming the core variable supporting domestic price strength.

The "Spillover" Effect on Costs

Unlike overseas plants that rely heavily on oil and gas, China's chlor-alkali industry is predominantly coal-based, ensuring high energy independence. Therefore, the core logic behind this price increase is not an out-of-control domestic production cost, but rather:

• Energy Cost Parity: Rising global energy prices have pushed up the costs of ethylene-based caustic soda abroad, highlighting the cost-effectiveness of Chinese products.

• Logistics Surcharges: Rerouting around the Strait has led to spikes in freight rates and war risk insurance, passively raising export FOB quotes and providing strong support for domestic ex-factory price floors.

A Divergent Supply-Demand Pattern

Currently, China's domestic production remains stable, with some previously offline units resuming operations. However, domestic downstream sectors (such as alumina, printing and dyeing, and papermaking) have shown limited acceptance of high prices, with transactions focused on immediate needs. The robust export market, however, has balanced this domestic sluggishness, leaving manufacturers with ample pending orders and creating a market state of "low factory inventory and high resilience."

3. Regional Market Price Details

Under current market conditions, quotes from major production hubs in China vary:

In the Northwest Regions (Inner Mongolia, Ningxia, Shaanxi, Gansu, and Qinghai), ex-factory quotes for ≥98% caustic soda flakes are currently ranging between 3,000–3,100 RMB/ton. Meanwhile, in Shandong Province, mainstream ex-factory quotes (including tax) are holding firm between 3,200–3,550 RMB/ton.

Xinjiang, as a vital supply base, sees ex-factory quotes for ≥98% flakes around 2,750–2,800 RMB/ton. For goods shipped to Central and East China, the "delivered-to-station" (DTS) prices range approximately between 3,300–3,650 RMB/ton.

For truck-delivered prices to end-users in East China, the reference is 3,500–3,550 RMB/ton, while in South and Southwest China, prices are generally around 3,600–3,650 RMB/ton. Please note that final delivered prices typically include an additional short-haul transport fee of approximately 200 RMB/ton.

4. HM Forecast: Balance and Reversion

In the short term, the domestic market is expected to enter a period of "high-level consolidation," with price adjustments anticipated within a narrow range of 50–100 RMB/ton.

While export orders and cost factors provide support, this current trend is highly dependent on the "geopolitical premium." Should tensions ease or shipping order be restored, a drop in export demand could trigger a price correction. Wuxi High Mountain advises partners to monitor geopolitical developments closely and maintain a rational inventory pace to mitigate risks associated with sudden international shifts.