The Demand Has Not Improved Yet, And The PVC Market Is Difficult To Be Optimistic

Dec 29, 2023

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Entering December, the spot market sentiment of PVC (5892, -67.00, -1.12%) has rebounded, and the futures price has also shown a phased rebound. Among them, the trend of far month contracts is relatively strong, with a slight upward trend. “From the perspective of the market situation, the PVC futures price has not yet broken free from the range oscillation trend, and the focus has stabilized after stepping back on the support of the 5850 yuan/ton line, standing firm in the short-term moving average support, and gradually returning to above the 6000 yuan/ton level. However, the rebound driving force in the past two days has been weak, indicating that there is still upward resistance.” said Xia Congcong, Director of Energy and Chemical Research for Fangzheng Medium Term Futures.

“Recently, PVC has shown a rebound trend, mainly due to the expansion of upstream maintenance and the maintenance of overall inventory in the industry. In the short term, supply reduction combined with a slight rebound in demand has provided some support for the fundamentals. In addition, PVC is currently affected by red sea transportation and domestic interest rate cuts over the weekend, further improving the market atmosphere, coupled with reduced market arrivals due to weather conditions, boosting bullish sentiment and benefiting the PVC market.” Wu Zhiqiao, the leader of the Energy and Chemical Group of Green Dahua Futures, said that overall, the PVC market has shown good cost performance recently. Due to the rise in calcium carbide prices and high energy prices, the cost continues to be high, which supports the market price pressure.

Regarding this, Xia Congcong also stated that the sentiment in the PVC market has rebounded, partly driven by the futures market, and partly due to a slight decline in the supply side. Affected by weather factors, transportation in some areas is not smooth, which in turn affects the delivery of raw materials such as calcium carbide. The operating load of some external calcium carbide production facilities continues to decrease, and the overall operating load of the PVC industry has expanded, resulting in a slight increase in maintenance losses. The overall operating rate of the PVC industry was 76.50%, a decrease of 3.04 percentage points compared to the previous period. The sellable inventory of PVC enterprises has declined, while the inventory in the factory area remains at a low level and has not yet accumulated. The shipment of enterprises in the northwest main production area is slightly tight. In addition, the upstream raw material calcium carbide market prices have slightly increased, and the cost side has followed suit.

It is understood that in recent times, the domestic calcium carbide market has rapidly increased, with mainstream trade prices in the Wuhai region increasing by 150 yuan/ton to 3000 yuan/ton. Production enterprises are producing goods smoothly, and the supply of goods is slightly tight.

“Last week, while the Inner Mongolia region continued to experience power rationing, Ningxia region experienced power rationing one after another, leading to increased market supply instability.” Cui Heng, an analyst at Longzhong Information, told Futures Daily reporters that with the melting of snow, automobile transportation has gradually recovered, but overall vehicle search is difficult, and there is a regional shortage of supply in Lanzhou Charcoal, which affects the operating load of calcium carbide. At the same time, with the recovery of logistics links, there has been a concentrated arrival of goods downstream, and regional uneven arrival has strengthened. PVC companies that reduced their load in the early stage actively purchased, while downstream companies actively replenished their inventory. As the arrival of goods improved, downstream production was in a state of recovery, and the overall market performance was in short supply.

“It is expected that the power rationing will continue this week, and the tight supply of goods in the market will continue. Under cost pressure, the resistance to the continuous rise of calcium carbide will increase, and the price will increase regionally, with limited growth.” Cui Heng said.

In Wu Zhiqiao’s view, there is still an expectation of a rebound in the PVC spot market in the short term, supported by favorable costs and supply side conditions. However, currently, the scale of maintenance is limited and the duration is short, coupled with downstream demand in December