PVC Downstream Demand Update
PVC Futures Analysis: On December 5th, the PVC2601 contract saw narrow price fluctuations in the night session, with a relatively small range of price movement. Prices gradually declined in the morning session, with a significant drop, before consolidating within a narrow range at lower levels in the afternoon.
The PVC2601 contract opened at 4502, reached a high of 4503, a low of 4413, a spread of 90, an increase of 7370 lots in open interest, a total open interest of 997451 lots, a settlement price of 4453 (compared to the previous settlement price of 4503, a decrease of 50), and a daily trading volume of 695710 lots. The total amount of idle funds was 3.09 billion yuan, with an outflow of 28.45 million yuan.
Regional Price Overview: Yuan/Ton
PVC Spot Market: Domestic PVC market mainstream transaction prices declined slightly, and market sentiment shifted again. Price comparisons show that prices fell by 20 yuan/ton in North China, 20-30 yuan/ton in East China, 40 yuan/ton in South China, 10-20 yuan/ton in Northeast China, 20 yuan/ton in Central China, and 10-20 yuan/ton in Southwest China. Upstream PVC producers mostly maintained stable ex-factory prices, with no significant adjustments observed.
Recently, upstream factories have largely deviated from price fluctuations, offering stable quotes. On Friday, futures prices fell sharply, and spot market sentiment was unstable, with fixed prices continuing to decline. However, the advantage of spot pricing emerged after the futures price decline, and basis quotes adjusted slightly. Specifically, basis quotes for the January contract in East China were -(50, -50), in South China -(0, -30), in North China (-330, -340, -380), and in Southwest China, some sources offered -(160, -180, -310) for the January contract.
Following the decline in futures prices, the spot market reported increased trading volume compared to the previous period, with downstream buyers showing increased willingness to place orders at lower prices.
PVC Market Outlook:
Futures Market: The PVC2601 futures contract saw a clear downward trend, with prices retesting the lower price range and reaching 4416, three points below the previous low. The market briefly saw slightly more short positions than long positions, with short positions accounting for 24.2% of trading volume compared to long positions for 22.0%.
The sharp and gradual decline in prices led to a return to a weak market sentiment. At midday closing, most domestic futures contracts declined, with coking coal falling over 3%, polysilicon falling nearly 3%, and ethylene glycol, alumina, and coking coal falling over 2%. Weakening commodity sentiment also contributed to the decline. Overall, in the short term, prices are expected to retest the historical low of 4405 for the main contract, and the support level at this level should be closely monitored.
In the spot market: As mentioned in our previous forecasts, there is a discount structure between spot and futures prices at the current low levels. Friday's decline in futures prices slightly changed the atmosphere, but there is still some restocking demand at these low levels. From the perspective of essential demand, downstream product manufacturers and traders all have demand, and the ex-factory prices of upstream factories are already at historical lows.
Correspondingly, after the decline in futures prices, the spot market has become more resilient. Returning to the issue of demand, although demand still exists, it is too early to talk about stockpiling at the current time. Excessive capital tied up cash flow, and delivery time is also a certain constraint.
Regarding the current further decline in both spot and futures prices, we believe that spot market prices may still face low-level tests in the short term, but the downside is expected to be limited. Similarly, there are no conditions for price increases, and prices may continue to test the bottom for a longer period of time.
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