PVC | Analysis Of Market Trends in The First Quarter

Apr 10, 2023

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Entering January 2023, the overall trend of the PVC market is improving. Boosted by the confidence of macro watchers, traders actively raised their prices. However, due to the impact of the Spring Festival holiday, there were not many actual transactions on the market, there was not much stock of downstream products before the holiday, there was a moderate inventory of raw materials, there were not many new orders received, and market transactions were light. Some traders pre-sold post holiday sources of goods. After the holiday, the inventory accumulation speed of the PVC industry is relatively fast, and the supply side pressure is increasing.

The fundamentals are weak but the macro outlook is positive, and the market continues to be at a high level after the holiday. However, after entering February, the PVC market did not continue to operate at a high level. At the beginning of the month, with the gradual digestion of the macro positive factors, the industry inventory continued to increase. Although the downstream construction resumed after the Yuanxiao (Filled round balls made of glutinous rice-flour for Lantern Festival), it was not as fast as the inventory accumulation speed.

The contradiction between supply and demand of PVC was obvious, and the spot price fell under pressure. The low price fell to 6220 yuan/ton within the month; In the second half of the month, the real estate policy was adjusted, the market mentality was improved, and the price fluctuated upward. However, the terminal inquiry was general, and it was difficult to follow up the transaction. The market price was limited. The PVC market was under pressure. The recent global economy was under pressure, the domestic bulk commodities fluctuated, the PVC real estate commencement and sales data were still under pressure, and the terminal orders were insufficient.

In the short term, domestic production enterprises are gradually undergoing maintenance, resulting in a decrease in market supply. However, demand is under pressure, supply and demand are weak, and inventory remains high; In terms of industrial production costs, calcium carbide and chlor alkali have slightly declined, continuing to show losses. High cost enterprises are facing production load reduction, and the PVC market is facing difficulties in destocking. Prices are weak and volatile, waiting for the opportunity to reduce production and destock.

In the international market:

PVC in Asia remained stable in January. The price of PVC in CFR China remains stable at $890 per ton, while the price in CFR India is $945 per ton; Asian PVC is still boosted by strong demand from India.

In February, the domestic export market remained strong, and export orders from various enterprises were also good. However, with the increase in supply of goods from India to Hong Kong and the weakening of the Chinese market, foreign investors began to wait and see, waiting for further decline in export prices.

Recently, with the weakening of Chinese demand and the growth of global supply, the spot price of PVC in Türkiye has dropped by 70 dollars. The demand for PVC in Asia is weak, Indian inventory is high, and Chinese exports are increasing. The quotation in April decreased by $60 to $70/ton compared to March, and the price of PVC in Asia decreased by $30 to $40/ton. The price of PVC in CFR China decreased by $35/ton to $855/ton, while the price of PVC in CFR India decreased by $30/ton to $890/ton. Although the quotation is low, buyers are unwilling to accept the new quotation in April, and the supplier has only sold 40% -50% of the order volume so far. The buyer is unwilling to accept the new offer, and it is expected that the offer will continue to decline, especially from Chinese Mainland.

Overall, in the short term, the PVC center of gravity will shift downwards, with external and supply and demand pressures being the main bearish factors. In the medium to long term, fundamentals lead to low prices, and spring inspections are passively advanced. Its upward potential is influenced by the pace of inventory digestion and policy expectations.