This week, the domestic PVC market’s spot and futures prices have weakened synchronously, with prices fluctuating and falling. The market has a strong wait-and-see atmosphere, and overall transactions are relatively weak. The emotional speculation caused by the previous real estate policy has gradually subsided, returning to the fundamental game. Supply has slightly rebounded, and demand has rebounded seasonally, but the strength is insufficient. The industry is still in a loss making state, and costs have formed a bottom support for prices. The SG-5 weekly decline of East China calcium carbide method was as high as 5.1%.
1、 Price Trends
Spot (SG-5 carbide method)
The mainstream of cash withdrawal in East China: 4780-4860 yuan/ton; The market in Linyi, Shandong Province has cumulatively lowered by 100-200 yuan/ton this week, and slightly loosened to 4700-4750 yuan/ton over the weekend.
Ethylene based PVC: 5350-5500 yuan/ton, affected by the cost of ethylene raw materials, the price is relatively resistant to decline.
Futures market
The main PVC contract of Dashang Exchange continued to decline within the week, and the rebound market driven by previous policies fell back. The market followed the weakness of spot prices, and the basis was slightly repaired. The market’s bullish confidence fell, and short-term fluctuations were mainly weak.
2、 Trend analysis
Supply side: The maintenance department has resumed work, and the operating rate has slightly increased
This week, some of the early maintenance equipment resumed production, and the manufacturer’s load generally increased. There were not many new maintenance additions, and the operating rate increased to nearly 70%, still in a relatively low position compared to the same period in recent years.
However, currently, companies using the calcium carbide method and ethylene method generally suffer losses, especially those using the ethylene method which suffer from significant losses. These losses suppress the willingness of companies to actively increase production, resulting in limited recovery of production and difficulty in maintaining high prices. If the price continues to decline in the later stage, it is not ruled out that some companies may reduce production and lower prices again to protect prices.
Demand side: Insufficient quality during the peak season of Golden September, making it difficult to sustain high levels
In terms of downstream demand, plastic product companies have seen a slight increase in production, with overall downstream production rising to over 40%, a slight improvement compared to the previous peak season, but significantly lower than the level of previous years. Real estate remains the core drag, with limited transmission of terminal real estate completion. There has been no significant increase in new orders for pipe and profile enterprises, and most of them are mainly purchased on demand and taken as needed, resulting in insufficient procurement and stockpiling. Moreover, the absolute value of overall inventory is still high, the pace of destocking is slow, and inventory pressure has not substantially eased.
Export: Overseas shipping costs have risen, and external quotes have strengthened, but actual overseas buying follow-up is limited, and export growth is limited, making it difficult to hedge domestic pressure.
Cost end
Calcium carbide: Coal and blue carbon prices remain high, with strong cost support for calcium carbide. However, PVC prices are below the cost line, and the calcium carbide method continues to suffer losses, becoming a hard support below spot prices and limiting the potential for significant deep declines. According to the commodity analysis system of Shengyi Society, although the price of calcium carbide is at a high level, there is a downward trend, with a slight decrease of 0.74% this week.
Ethylene process: International crude oil is fluctuating at a high level, and the cost of ethylene raw materials is high. The losses of ethylene process enterprises are further amplified, which suppresses the operating rate of ethylene process.
3、 Future prospects
Analysts believe that PVC will maintain a weak and volatile pattern in the short term: there are still many negative factors in the market, supply is expected to recover, operating rates may continue to rise, and terminal demand is weak, with limited improvement in real estate terminal demand. Downstream buyers are cautious in purchasing, high inventory needs to be digested, and weak futures sentiment is suppressing spot prices. So, recently PVC prices have been mainly weak.
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