The Fundamentals are still not Optimistic, and the Short-term Decline of PVC is Difficult to Change

Abstract: At present, the upstream supply of calcium carbide is sufficient, the social inventory of PVC is high, and the terminal demand is difficult to improve. Even in the maintenance season, the problem of oversupply in the PVC market is difficult to alleviate.

The cost side is difficult to boost

During the Qingming period, the highway transportation control of hazardous chemicals affected the supply of calcium carbide, which made the inventory of calcium carbide enterprises rise slightly, but the overall impact on the supply and demand of calcium carbide was limited. At present, the domestic supply of calcium carbide is sufficient, affected by the downstream PVC maintenance expectations, some calcium carbide manufacturers have recently reduced their inventories by cutting prices, in order to cope with the later consumption off-season. Affected by the slight decline in calcium carbide prices, domestic calcium carbide production enterprises have turned from profits to losses, with a current loss of about 40 yuan/ton, but it is far from reaching a state that enterprises can not bear. Therefore, it is difficult to change the short-term domestic calcium carbide supply sufficiency.

Since March, the domestic PVC spot price has continued to fall, and the decline is greater than the downward shift of the cost center of gravity, which makes the losses of domestic PVC manufacturers expand slightly. Up to now, the average loss of domestic calcium carbide base PVC production enterprises is 310 yuan/ton, and the average loss of ethylene base PVC production enterprises is 220 yuan/ton. However, although the losses of domestic PVC production enterprises have expanded, the operation load of PVC devices is relatively stable, and the domestic PVC operation load is expected to decline in the later period.

In addition to high production level on the supply side, high inventories enterprises are also the main factors suppressing PVC prices. Relevant data show that as of now, the domestic PVC social inventory is 604,700 tons, an increase of 16.15% year-on-year. At present, the domestic PVC social inventory is significantly higher than the level of the same period in previous years, indicating that the overall oversupply problem of the PVC industry is more serious and has been in the stage of inventory accumulation.

Downstream consumption is weak

The PVC downstream real estate industry is still in a weak state, with real estate investment falling by 9% year-on-year from January to February, and data such as construction completions also performed poorly.

In terms of overseas markets, in recent years, domestic PVC exports to India and PVC floor exports to Europe and the United States are important sales channels for PVC. In the first quarter, affected by factors such as weak foreign demand and light trading in the Ramadan market, China's PVC exports showed a downward trend. According to the data released by the General Administration of Customs, the cumulative domestic PVC exports from January to February were 406,500 tons, down 101,700 tons from the same period last year, a year-on-year decrease of 25.02%. At present, India has a strong rigid demand for China's PVC, with the decline of domestic PVC prices, domestic export advantages will appear, so PVC exports are expected to pick up in the second quarter.

At present, the fundamentals of domestic PVC are still not optimistic. First, the supply of calcium carbide is sufficient, and enterprises are choose to reduce price recently, and the cost support is weakened; second, although the domestic PVC production enterprises have entered the maintenance season, the production is expected to fall, but the PVC inventory is high, and the market supply pressure is still large; the third is that the main terminal real estate industry of PVC is weak, even if the performance of relatively small proportion soft products is excellent, and the export is expected to rise in the later stage, the overall demand for PVC is difficult to improve substantially. Based on the above situation, we believe that PVC prices are expected to fall further, focusing on the support of 5750 yuan/ton, and if an effective breakthrough is formed downward, the short order will be established against this line.