1、 Price trend
This week, the PVC market continued its downward trend from last week, with the futures market remaining weak throughout the week and limited changes in the spot market. The mainstream spot market of SG-5 maintained a low range operation. This week, PVC fell by 1.71%.
Futures: The main contract of PVC2701 started at 4673 yuan/ton at the beginning of the week and fell to around 4515 yuan/ton over the weekend, with a slight downward shift in the overall range and intense long short game.
Spot: Approaching the weekend, the mainstream of East China SG-5 is 4420-4500 yuan/ton; The fluctuation range of spot goods is much smaller than that of futures, and traders ship along with them. Downstream buyers buy a small amount of inventory at low prices, and their willingness to hoard a large amount of goods is not strong.
2、 Factor analysis
Supply side: The operating rate is still at a medium low level
This week, some of the industry equipment is still in the maintenance period, and some of the early maintenance equipment is gradually planned to resume production. The overall operating rate remains above 70%. The maintenance will gradually end at the end of August, and there is an expectation of a rebound in production in the later stage, which poses a risk of supply pressure rebounding.
Calcium carbide method: Due to the impact of corporate losses, there are many instances of proactive load reduction and maintenance, with a utilization rate of over 70%; The disturbance of power in the northwest indirectly affects the supply of calcium carbide, and the price of calcium carbide remains stable. Calcium carbide production enterprises continue to operate at a loss.
Ethylene process: Due to the transmission of international crude oil geopolitical fluctuations, the cost of ethylene raw materials fluctuates, and the US Iran situation repeatedly disturbs cost expectations. The ethylene process is also in a loss making state, and the load elasticity of the equipment changes with the pace of maintenance.
Demand side: Procurement is not making efforts, overall performance is sluggish
Currently at the end of the traditional off-season, downstream overall production remains low, and structural differentiation is evident. Pipe material: Due to the sluggish start of new real estate construction, the production rate remains around 30%, with insufficient orders. The product factory mainly purchases for essential needs, and the inventory of raw materials remains low. Profile: performs slightly better than pipe, with nearly 40% of production starting. Some orders come from stock renovation and old renovation projects, but the increment is limited. Export: Overseas demand is flat, coupled with trade barriers in some regions, and there is no significant increase in export orders compared to the previous period, making it difficult to form a strong driving force. Downstream consumers are generally observing and not actively replenishing inventory in large quantities. The real improvement in demand will need to be verified during the traditional peak season in September.
Inventory: The destocking process will continue
This week, PVC continues its trend of reducing inventory, but the effect is average. Currently, the absolute value of inventory is high, and it is difficult to fundamentally alleviate the market supply pressure. Upstream factory inventory has slightly declined; Difficulty in reducing social inventory has suppressed prices. Overall, the extent of destocking is limited, mainly relying on upstream maintenance to reduce production, rather than downstream demand increasing procurement.
Cost aspect:
Calcium carbide: The prices in the main production areas remain stable, and the power supply situation of power plants has become a variable for calcium carbide. The cost forms a bottom support for PVC, but the upward drive is insufficient. According to the commodity analysis system of Shengyi Society, this week’s increase in calcium carbide continues the previous week’s rise, but the increase is limited. The increase in calcium carbide this week is only 0.40%. From the graph, it can be seen that calcium carbide has reached a temporary high.
3、 Future prospects
Short term PVC may maintain a narrow range of fluctuations, and the fundamental pattern of supply and demand is difficult to shake. It is difficult to break out of a unilateral market in the short term. On the one hand, production enterprises continue to suffer losses, reducing production to support prices and locking in downward space. On the other hand, the combination of high inventory and weak demand pattern makes it difficult for the market to break through the upward trend.
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