PVC Price Downside Expectation
PVC Futures Analysis: On November 26th, the PVC2601 contract price fell slightly in the night session, reaching a low of 4466. The price rose slightly in the morning session, but the increase was small, followed by consolidation, maintaining a narrow range of adjustment in the afternoon.
PVC2601 contract opening price: 4483, highest price: 4501, lowest price: 4466, price difference: 35, decrease in open interest: 33,859 lots, open interest: 1,227,649 lots, settlement price: 4485, previous settlement price: 4508, down 23, daily trading volume: 583,601 lots. Evaporated funds: 3.858 billion yuan, outflow: 108 million yuan.
Regional Comprehensive Price Overview: Yuan/ton
PVC Spot Market: The mainstream transaction price in the domestic PVC market fell slightly, ending three consecutive days of increases. In terms of price comparison: Prices fell by 20 yuan/ton in North China, 10-20 yuan/ton in East China, 20 yuan/ton in South China, 20 yuan/ton in Northeast China, and 10 yuan/ton in Central China, while remaining stable in Southwest China. Most upstream PVC producers maintained stable ex-factory prices, with no significant adjustments observed.
Futures prices weakened slightly, and the spot market ended its continuous slight rise, turning downwards. Spot market offers weakened, but the price advantage was relatively obvious after the futures price decline, and basis adjustments were minimal.
Specifically, the basis for the January contract in East China was -(0, 50, -70 or +20), in South China it was -(0, -30 or +20), in North China it was -320, -340, -370, and in Southwest China, some sources had individual January contracts at -(160, -180, -300).
After the price decline, inquiries for spot transactions increased slightly compared to the previous period, but downstream product manufacturers mainly focused on immediate needs, and there was no significant change in trading activity.
PVC Market Outlook:
Futures Market: The PVC2601 futures contract price movement was slightly weaker than Monday and Tuesday, with prices generally trading below 4500. The fluctuation range remained relatively narrow, and the market continued to see a reduction in open interest.
In terms of trading volume, short covering accounted for 23.2% compared to long covering for 25.4%, with a relatively large number of long positions exiting, putting pressure on prices and signaling that a good upward trend is unlikely under the current circumstances. Some long positions were stopped out.
Technically, the Bollinger Bands (13, 13, 2) are still all opening downwards, and the monthly spread between the 2601 and 2605 contracts remains around 300. In the short term, the price movement may still face some pressure, especially with repeated testing of the lower range.
In the spot market: Looking at the futures price trend, there is still some pressure above 4500. Policy support and fundamentals are unlikely to provide significant support, and given the current off-season, there is no basis for further price increases.
In the spot market, Formosa Plastics in Taiwan lowered its December PVC export prices: FOB Taiwan decreased by $50 to $570, CFR to China decreased by $30 to $640, and CFR to India decreased by $60 to $660.
Currently, spot offers from traders in various regions and ex-factory prices from upstream factories are at historically low levels, leading to some recent hoarding activity in the spot market. However, at this juncture, we believe that both the futures and spot markets still face considerable pressure.
Although the spot market may continue to adjust within a narrow range in the short term, given the weak fundamentals, there is still an expectation of breaking new lows in both the futures and spot markets.
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