The Market Signal Is Not Clear, And The Trend Of PVC Market Has Not Come Yet?

Feb 21, 2023

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The supply side presents a phased loose situation

Since the second half of 2022, affected by the general performance of the terminal real estate market, the problem of PVC oversupply has become prominent, and the social inventory has continued to rise. In this case, PVC production enterprises were forced to reduce prices and reduce volume to relieve inventory pressure. With the sharp fall of PVC price, PVC carbide production enterprises have been in a state of continuous loss since the second half of 2022. As of February 16, the average loss of domestic calcium carbide PVC production enterprises was 315 yuan/ton. However, affected by the recent drop in calcium carbide prices, PVC prices have risen steadily, and the loss situation of calcium carbide manufacturers has improved, but the overall loss situation has not changed.

The continuous loss has reduced the production enthusiasm of domestic PVC enterprises, and some enterprises choose to stop to avoid the loss risk. The average operating load of domestic PVC production enterprises in the first half of 2022 is 79.56%, and the operating load from the second half of 2022 to now is only 73.96%. As of the week of February 17, the average operating load of domestic PVC production enterprises was 77.54%, down 3.41% from the same period in 2022. At present, although the domestic PVC starting load has not recovered to the same level in 2022, it has increased by 7-8 percentage points from the low point at the end of 2022, and the short-term supply of the market has entered the stage of phased easing, which is mainly due to the recent loss reduction of PVC production enterprises by calcium carbide method, and the Spring Festival overhaul has not been carried out.

In addition, chlor-alkali belongs to the field of salt chemical industry, and the two are associated. At present, the price of caustic soda is good, and the domestic integrated chlor-alkali enterprises are in a profitable state. As of February 16, the average profit of domestic chlor-alkali was about 800 yuan/ton. In this case, chlor-alkali enterprises insist on production through the strategy of raising chlorine with alkali, which increases the tolerance of PVC production enterprises to operating losses, thus stimulating the recovery of PVC production enterprises.

The key to stabilizing the demand side lies in the recovery of the real estate industry

First of all, because PVC downstream products pipes and profiles are mainly used for housing pipes and windows, the performance of the real estate industry has a great impact on the demand for PVC. Affected by a series of policies issued by the state to promote the recovery of the real estate industry, the housing prices in some cities have shown signs of recovery recently, and the recovery of the domestic real estate industry has been basically determined, which will have a relatively strong driving effect on the demand for PVC.

However, it will take several months for the policy to be implemented and transmitted to the industry. At the same time, whether the confidence of the market in the real estate industry can be restored also needs attention. Therefore, it is difficult to determine the extent of the recovery of the real estate industry and the boost of the demand for PVC.

On the whole, at present, the stimulus effect of infrastructure on PVC is limited, and it is difficult for exports to replicate the performance in 2022. The demand for PVC is largely dependent on the recovery of the real estate industry. However, it is the off-season of the real estate industry, and the implementation of the policy takes time. Although the PVC downstream enterprises have started to recover, there is no obvious sign of improvement compared with previous years. In recent years, domestic PVC profile enterprises have not seen much progress in overall construction. The order situation is not good. The enterprises have sufficient inventory and are cautious in stock preparation. Most of them purchase on demand according to the order. There are few cases of active stock preparation. Demand has a relatively limited role in promoting PVC.

The impact of vinyl chloride leakage in the United States on the market is limited

On February 3, a freight train derailed in Ohio, causing vinyl chloride leakage. Vinyl chloride is a raw material for polymerization and production of PVC. It is also a toxic substance with active chemical properties. In order to prevent residents from inhaling toxic substances and avoid potential hazards, the United States government evacuated surrounding residents. The annual output of PVC in the United States is about 7 million tons. Although the output is less than that of China, it is the largest PVC exporter in the world. The occurrence of this event will trigger the United States to strengthen its control over the transportation of vinyl chloride, which will have a certain impact on the production and export of PVC. However, at present, the impact of this event on global PVC trade is limited.

Summary and future prospects

Based on the above analysis, the fundamentals of PVC are still not optimistic. The upstream calcium carbide price fell, the supply was sufficient, and the cost side’s support for PVC was limited. In terms of supply, affected by the fall in the price of calcium carbide, the loss of PVC production enterprises using calcium carbide method has narrowed, and the price of caustic soda has performed well. The chlor-alkali enterprises have adopted the strategy of raising chlorine with alkali to further ensure the supply of PVC, which makes it difficult to solve the problem of high inventory of PVC at present. In terms of demand, the stimulus effect of infrastructure investment on PVC is limited, and the export is expected to decline strongly.

The recovery of PVC demand mainly depends on the recovery of the real estate industry. Although the government has issued a series of policies to stabilize the real estate industry and the market has basically reached a consensus on the recovery of the real estate industry, the recovery of the real estate industry still needs to be verified by follow-up data. At present, the real estate stabilization policy plays a very important role in the promotion of PVC downstream enterprises.