Spot transactions decreased, and it is expected that it will take time for PVC market prices to stop falling and rebound
Since last November, the PVC downstream demand has not improved markedly owing to several factors, from cold weather to the fact that downstream enterprises' operating rates continue to show a slight decline. The market mood is weak, but the operating rates are still high. Prices for PVC fluctuate downward again, with the main future's contract sinking to its yearly low.
Limited support on the cost side
In November, the operating rate of calcium carbide was basically stable, but it was still at a historical low. The profit of calcium carbide has not turned positive, and the oversupply pattern continues. At present, the unstable power supply in Inner Mongolia has eased, Yili has gradually resumed production, the overall calcium carbide shipments are normal, the PVC operating rate is high, and the stocking demand brought by rain and snow weather has increased downstream demand slightly, but the downstream cost pressure is large, which resists the increase in calcium carbide prices. It is expected that the price of calcium carbide will remain stable, and the support for PVC prices will be limited.
The potential for conflict to deepen between Iran and Israel does not seem likely, given the current softening geopolitical environment. More conflict between Russia and Ukraine has escalated, but it has not had much influence on the actual flow and transportation of crude oil. Besides that, Israel has reached a ceasefire deal with Lebanon, so the situation in the Middle East has eased off. On demand, global economic growth has been sluggish since its cratered refining profit, together with the rising new energy replacement rate; thus, crude oil demand is expected to drop on the month. On supply, mainly because of a high tendency that OPEC will further postpone the production raising, easing supply pressure is a recent sign, but rising UAE's production quota, plus the failure of Iraq and other countries to actually cut production has sowed doubt into the market regarding OPEC's strategy. Further, the recent hike in US crude oil production to record highs and non-OPEC oil-producing countries taking further market share recently renders the estimates of global crude oil stocks across the three major assessment institutions all leveled towards marketing crude oil into an oversupply in 2025 as limited odds in upward pressure apply unto oil prices.
High operating rate
The amount of PVC maintenance reduction has gradually decreased since July. From January to October this year, the cumulative amount of PVC maintenance reduction was 5.8772 million tons, a year-on-year decrease of 0.18%. There are not many maintenance plans in November. In addition, the new production capacity of Shaanxi Jintai and Zhejiang Zhenyang Development has been put into production. Since August, the monthly output of PVC has been near the highest level in the same period in history.
As of the week of November 28, the operating rates of Shaanxi Beiyuan, Guangxi Huayi and other units increased, and the PVC operating rate increased by 2.09% month-on-month to 80.53%, 5.89% higher than the average level of the same period in the past three years, and at the highest level in recent years. Among them, the operating rate of the mainstream calcium carbide method increased by 2.4% month-on-month to 80.35%. Although the production of calcium carbide PVC has suffered losses, supported by the demand for alumina, the profit of caustic soda production is good, and the "chlorine supplement with alkali" makes the comprehensive profit of chlorine alkali enterprises acceptable, and the PVC operating rate has not been affected for the time being. In addition, with the arrival of winter, enterprises will actively maintain production for safety reasons. In December, only Hanwha Ningbo has an annual maintenance plan, and it is expected that the PVC operating rate will continue to remain high.
Few highlights in demand
The country introduced policies such as lowering the reserve requirement ratio, cutting interest rates, lowering the interest rate on existing mortgage loans, and supporting local governments in resolving debts to knock-start the real estate market, since the initiation of the interest rate-cutting cycle spearheaded by the Federal Reserve. Various indicators of the real estate industry have improved marginally. However, judging by the performance of direct downstream demand associated with PVC, the current favorable policies have not yet transmitted into terminal demand. As of the week of November 28, the PVC industry imposed an operating rate increase of 0.19% month over month to 42.57%, down 1.9% year on year, which stood rather low in recent years. Among this was a 0.31% month-on-month drop in the operating rate on pipes to 36.25%. Downstream orders fell off, finished product stocks were high, and downstream purchasing enthusiasm was poor. In December, domestic PVC demand is expected to weaken further.
The export demand was a bright breakthrough for PVC, but the outlook for export demand for the fourth quarter is not encouraging. In order to carry out the BIS policy certification, India has postponed the program until after December 24, and PVC has shown a "dash for the exports". The export volume is around 278,200 tons, an increase of 24.03% year-on-year, which was the highest level during the same time period of last year, only slightly lower than March this year or April 2022. However, on October 30, 2024, the Indian Ministry of Commerce and Industry, issued an announcement for the imposition of temporary anti-dumping duties on PVC (K value 55 to 77) originating from mainland China, Taiwan, South Korea, Japan, Indonesia, Thailand, and the United States. In light of the pressure exerted by India's BIS policy, traders are generally more careful, and it is expected that exports of domestic PVC to India would take a downturn. The volume of domestically-made PVC exported to India accounts for 50% of the total volume of export, and that of September is thought to be the peak during the latter half of this year. In October, PVC exports from China amounted to 232,400 tons, increasing by 63.38% year-on-year, but diminishing by 16.45% from September.
In the case of weak demand, PVC social inventory has increased for five consecutive weeks. As of the week of November 28, PVC social inventory increased by 1.18% month-on-month to 487,400 tons, an increase of 14.74% over the same period last year. Social inventory has accumulated slightly and is still at the highest level in the same period of the previous year.
At present, the chlor-alkali unit is still profitable. Yili Chemical plans to restart the unit in early December, and PVC production will increase further in the future. The operating rate of PVC downstream is poor, and most of the purchases are based on rigid demand. On the demand side, favorable real estate policies are temporarily difficult to boost terminal demand. India's plan to impose anti-dumping duties and BIS policy pressure are not conducive to domestic PVC exports. Social inventory pressure is still high, and spot transactions are weak. It is expected that it will take time for PVC to stop falling and rebound.
