During June, domestic PVC maintenance enterprises gradually resumed normal operations, and the operating rate showed an upward trend, which led to a continuous increase in supply pressure. However, from the demand perspective, the domestic market is facing the impact of the traditional off-season, the market has insufficient forward orders, and the current downstream product companies are mainly digesting existing inventory. At the same time, foreign trade is also constrained by multiple factors such as rising shipping costs and tight warehouses. In addition, in the process of seeking low-price games, it is difficult for the market to form an effective increase in volume, and the entire PVC market is showing a weak and slow decline.
Supply-side analysis
With the arrival of July, the maintenance work on the PVC production side has increased, and it is expected that the maintenance capacity will reach 7.26 million tons. In this context, the focus of the market is whether these maintenance measures can support the recovery and improvement of the PVC market to a certain extent.
Maintenance increased in early and mid-July, and the start-up rate decreased
This week, the domestic PVC industry capacity utilization rate has increased to 79.73%, an increase of 0.41 percentage points from the previous month. This increase is mainly attributed to the increase in the start-up of Shanghai Chlor-Alkali, Hebei Julong, Shandong Hengtong and other units, which in turn promoted the growth of the overall capacity utilization rate.
Compared with the same period last year, the start-up rate this week increased by 11.64% year-on-year. In the same period last year, the maintenance of Xinjiang Tianye, Cangzhou Julong, Shanghai Chlor-Alkali, Inner Mongolia Yihua and other enterprises led to a low start-up rate.
It is expected that next week, there will be several maintenance enterprises in China, involving production capacity including 250,000 tons of Ningxia Yinglite, 400,000 tons of Ordos Chlor-Alkali, 380,000 tons of Inner Mongolia Junzheng, and 800,000 tons of Bohai Development.
Affected by this, it is expected that the PVC capacity utilization rate will drop to 76.72% next week, a decrease of 3.01 percentage points from the previous week. In the subsequent period, there are still some maintenance plans, and the operating rate is expected to remain at a low level in mid-to-early July.
The industry inventory is still at a high level, and the pressure to destock is high.
From the current inventory status of the two warehouses, PVC inventory remains at a high level. Due to the sluggish market demand, production companies have adopted an active shipping strategy, resulting in a low level of factory inventory. Specifically, the inventory of 48 factory warehouse samples decreased by 3.21% from last week, and decreased by 30.34% from last year.
Although the factory inventory pressure is relatively small, the pressure has gradually shifted to social inventory. Affected by the sluggish downstream demand, the digestion speed of social inventory is slow. This week, the total social inventory reached 605,500 tons, a slight increase of 0.28% month-on-month and an increase of 25.28% year-on-year. Among them, the inventory in East China was 547,800 tons, an increase of 0.96% month-on-month and 41.84% year-on-year. In South China, due to the recent weather conditions affecting the arrival of goods and maintenance control, the inventory has decreased month-on-month.
According to the statistics of Longzhong Information, its 41 new samples of social inventory show that the total social inventory of PVC in China has reached 928,600 tons, an increase of 1.17% month-on-month. Combining the above data and the expansion of the new samples, the overall inventory level of the PVC industry is significantly higher than last year, and the inventory pressure has increased significantly. Although the supply side has shrunk due to the increase in maintenance of PVC enterprises, the social inventory has remained high, resulting in the PVC market still being in a loose supply pattern.
Demand-side analysis
1. Domestic demand continues to be sluggish, and the start-up rate of pipe profiles has declined
The operating rate of domestic PVC product companies has continued to decline, down 0.69% from last week, and the current trend shows that it is difficult to see a significant recovery in the short term. This trend is mainly attributed to the continued impact of the off-season demand and the fact that it will take some time for the policy to boost the hard product industry.
At the same time, the overall improvement of soft products is relatively limited. Although there is still some support at the policy level, the downstream end has not yet felt the substantial transmission of order growth. On the one hand, there are fewer new projects, and on the other hand, it is difficult to increase demand during the traditional off-season. Market demand is mainly concentrated on rigid demand.
At present, the overall boost effect of infrastructure construction on PVC is limited. According to the analysis of bidding conditions, the urban pipeline construction is expected to account for only about 10% of PVC consumption, and the real estate sector is in the off-season, so order growth is difficult to show. Therefore, the domestic PVC market will continue to face the dilemma of sluggish demand in the short term.
2. The competition pressure from external demand is relatively high, and the difficulty of signing orders has increased
According to the latest data, the export order signing of domestic PVC sample manufacturers this week decreased by 36% month-on-month, with a specific value of 19,000 tons. At the same time, the export delivery volume increased, reaching a growth of 48% to 33,000 tons. However, the volume to be delivered decreased by 40% compared with the same period last year, and currently remains at around 73,000 tons. Due to the influence of the rainy season in India, market demand has weakened. At present, the signing of export orders is still affected by ocean shipping costs, which makes it more difficult to sign orders.
It is reported that some previous orders have been cancelled due to the increase in freight rates. Currently, the PVC inventory level in India is at a low level, and there is a large supply of goods in stock. Considering that it is the rainy season, foreign buyers are relatively less active in purchasing, and it is expected that demand in India will gradually pick up in early October.
To sum up, in terms of domestic demand, the off-season has led to weakened demand; while in terms of foreign demand, affected by forward shipping costs, the speed of accepting orders has slowed down and overall demand has shown a sluggish trend.
Cost support weakens
Recently, the mainstream trade price in Wuhai has stabilized at 2,600 yuan/ton, and production companies are actively shipping. This week, the supply of calcium carbide has increased. On the one hand, it is due to the easing of power restriction policies in Inner Mongolia, which has improved the overall supply level; on the other hand, with the arrival of the flood season in the southwest, production has resumed significantly, further accelerating the growth of supply.
As downstream maintenance approaches, market sentiment is generally bearish, trade activities tend to be cautious, and procurement activities are guided by actual demand, resulting in certain difficulties for regional shipments by production enterprises. The price of raw material semi-coke was reduced by 50 yuan/ton this week, indicating that the support force on the cost side has weakened; at the same time, PVC prices continued to be weak and trading activity was low.
It is expected that the supply of calcium carbide will gradually increase next week, and the trend of oversupply will become increasingly obvious. The price of calcium carbide will continue to decline. Although the concentrated maintenance in July may lead to a decline in supply next week, the overall supply will remain high. Domestic demand has entered the off-season and demand has weakened; at the same time, the export market has slowed down its order acceptance due to the impact of forward shipping costs. Both supply and demand sides have shown a weak trend, and there is a risk of accumulation of industry inventory.
In addition, as the expected increase in calcium carbide exports, costs may be affected to a certain extent and fall, and cost support will move further downward. Overall, it is expected that the spot market will continue to be under pressure, and the operating situation will remain in a low range in the short term under the disturbance of macro expectations.
