PVC: The Bad News Gradually Faded, And We Will Wait And See The Return Of Demand

Aug 23, 2022

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Introduction: the complex and severe macro situation at home and abroad and the threat of economic recession, the recovery of domestic and foreign demand is far less than expected and faces more threats such as the epidemic, which do not support the further rebound trend of bulk commodities. The macro-economy is weak, and the continuous pressure of the Fed’s interest rate increase cycle

On the other hand, it is generally in the low consumption season of downstream terminals. From the demand side, August is in the off-season with PVC consumption, and the demand and order performance of the downstream of PVC continues to be weak. The short-term terminal orders are insufficient, the medium and long-term confidence in the terminal consumption market is insufficient, and the recent high temperature and the introduction of the policy of limiting power to the people have led to the further reduction of the downstream terminal start-up.

As of August 14, the domestic social inventory of PVC was 360600 tons, a month on month decrease of 0.74% and a year-on-year increase of 176.18%. Compared with previous years, the social inventory of PVC was still extremely high. Recently, there has been a news that PVC plants in Sichuan and Hubei have reduced their production due to power limitation. The PVC output of Sichuan and Hubei accounts for about 15% of that of the whole country. The domestic PVC output is still high, and the supply is greater than the demand. If the market power is alleviated and the output is further increased in the later period, the market still needs to pay attention to whether the demand will arrive as scheduled (gold, silver and ten).

However, it can be determined that the pressure at the PVC supply end is still large. From the data of real estate and infrastructure, the newly started area dropped sharply in July, and the construction area continued to drop. Although there was some improvement in infrastructure, considering the quota of special debt for the whole year, the short-term growth overdraw the long-term demand, so the overall data were relatively weak. It is not excluded that the economy in the second half of this year has a slow growth or a double dip trend, which will be a drag on PVC and terminal products. “

Overall, when will the domestic macro-economy hit the bottom? However, with the loosening of policies in the second half of the year, the demand will gradually improve, which will have a marginal beneficial effect on the PVC market. Second, when the overseas monetary tightening policy will turn. Considering that the current US inflation data is gradually slowing down, the pace of the Fed’s interest rate increase will gradually slow down, which will weaken the strength of the US dollar index and the valuation pressure of the financial market, thus driving the recovery of global market risk appetite. Therefore, it is expected that the future market of PVC will show the trend of first oscillating to find the bottom and then rebounding again.