The relationship between caustic soda futures and soda flakes/liquid caustic soda

The futures contract for caustic soda is 30 tons per lot, which is the price after discounting. The mainstream delivery product is 32% liquid caustic soda, and the alternative delivery products include 50% liquid caustic soda, 96% solid flake caustic soda, and 99% solid flake caustic soda. The storage fee is 2.5 yuan per day, and the inbound transportation fee by truck is 10 yuan. Based on the latest average price of 32% liquid caustic soda in Shandong at 870 yuan, the delivery cost is approximately 200 yuan. Calculated at the discounted price:
Liquid caustic soda: 870/0.32 + 200 = 2919 yuan.
In the past year, the lowest price of 32% liquid caustic soda was about 720 yuan at the end of April, and the highest price was 1020 yuan in November, with a fluctuation range of 300 points, corresponding to a futures price of 937.5 points, which is a highly volatile product.
The expected production of caustic soda in 2024 is 42 to 43 million tons, with an average daily production of 115,000 to 118,000 tons, equivalent to about 350,000 to 360,000 tons of 32% liquid caustic soda. However, the inventory of liquid caustic soda producers in the sample for 2024 is only 350,000 tons, which is only equivalent to one day's production.

Rules for caustic soda futures contracts：
I. Discounted quotation and dry ton delivery
The quotation method for caustic soda futures is based on the spot market, using a discounted quotation and dry ton delivery format, which facilitates the comparison and conversion of different forms and concentrations of caustic soda, and helps related industry customers clearly understand the quantity of goods when participating in caustic soda futures hedging and delivery. The specific conversion methods are as follows:
Conversion method for discounted price of 32% liquid caustic soda: Discounted price = Price including water / 32%;
Conversion method for discounted price of 50% liquid caustic soda: Discounted price = Price including water / 50%.

II. Trading margin standards and daily price limit
In the initial stage of listing, the trading margin standard for caustic soda futures contracts is 9%, and the daily price limit is ±7%. According to the relevant regulations of Zhengzhou Commodity Exchange, the daily price limit on the listing day of caustic soda futures contracts is ±14% of the listed benchmark price.

III. Trading unit: 30 tons (dry ton weight) per lot
Each lot of caustic soda futures contract is equivalent to 3 tank trucks of 32% liquid caustic soda or 2 tank trucks of 50% liquid caustic soda in the spot market. In fact, in the spot trade of caustic soda, the production, transportation, and storage of 32% liquid caustic soda and 50% liquid caustic soda are mainly in the form of tank trucks, with each tank truck carrying 30 tons. 30 dry tons correspond to 3 tank trucks of 32% liquid caustic soda or 2 tank trucks of 50% liquid caustic soda in the spot market. This design is conducive to both parties in the delivery process to combine the best delivery quantity based on their own procurement scale and transportation capacity, and also takes into account the benchmark delivery product and alternative delivery products.

IV. Contract delivery months: January to December
Since the production of caustic soda and its downstream industries is highly continuous, the contract delivery months are set from January to December, consistent with other industrial products, which conforms to the characteristics of spot supply and demand and meets the continuous risk management needs of industry participants.

V. Delivery method
Caustic soda futures adopt the delivery system and use a combination of warehouse and factory warehouse delivery methods. Factory warehouse delivery is in line with the characteristics of the liquid caustic soda market with few intermediate links and a high proportion of direct sales, while warehouse delivery is in line with the large trading volume of high-concentration liquid caustic soda.

VI. Warehouse receipts
Caustic soda futures use non-universal standard warehouse receipts. The validity period of the warehouse receipt is 2 months. The warehouse and factory warehouse standard warehouse receipts registered before the 15th trading day (including the 15th trading day) of January, March, May, July, September, and November each year should be cancelled before the 15th trading day (including the 15th trading day) of the same month.（From the inflection point Lao Li）