PVC is in a dilemma

At present, although the shortage of calcium carbide has eased and the cost-side support for PVC has weakened, rising exports and low inventories have provided support for PVC prices. In this context, PVC will show a trend of high oscillations.

　　 At present, as the tight supply of CALCIUM carbide is alleviated, the supporting role of cost for PVC has begun to weaken, and it is difficult for part of the downstream to conduct high-priced PVC downwards, showing that there are hidden dangers in the rise of PVC. However, the current low PVC inventory, rising exports, and the recovery of terminal real estate and infrastructure have provided new support to PVC prices, which makes PVC prices easy to rise but difficult to fall.

　　Weakened cost support

In March, the government strengthened the “dual control” of energy consumption in the northwest region, which restricted the production of large energy-consuming enterprises such as Calcium Carbide production, and the phenomenon of furnace shutdown or load reduction, resulting in a decline in the supply of calcium carbide, and the price of calcium carbide. Rising, some areas even hit a historical high of 5,000 CNY/ton. According to statistics, as of March 28, the spot price of calcium carbide in Northwest China was 4600 CNY/ton, an increase of 1680 CNY/ton from the low point at the end of January, an increase of 57.53%. The increase in calcium carbide prices has led to a sharp increase in the cost of calcium carbide PVC production enterprises, which is the most important reason for the sharp rise in PVC prices since the end of January.

　　 In April, the government's "dual control" of energy consumption will weaken, and calcium carbide production will gradually return to normal by then. At the same time, due to the insufficient supply of raw materials for downstream PVC production enterprises and the poor production and operation conditions caused by rising costs, the operating load of PVC production enterprises has decreased, which further alleviated the problem of insufficient supply of calcium carbide. In this case, the price of calcium carbide is more likely to fall from a high level, and the supporting effect of cost on the price of PVC will gradually weaken.

　　 The tight supply is expected to ease

　　 Affected by the sharp increase in the price of calcium carbide, the profits of calcium carbide PVC manufacturers continued to decline, and some companies had insufficient supply of raw materials, which led to large-scale overhauls of northern calcium carbide PVC manufacturers in mid-to-late March, resulting in a decline in PVC supply. According to statistics, as of March 30, the cost of calcium carbide production enterprises outside East China was close to 8,000 CNY/ton, and the production profit was 734 CNY/ton, a year-on-year decrease of 2536 CNY/ton. However, for the integrated plant in the Northwest region, although the profit of soda ash is currently at a low level, the price of liquid chlorine is relatively high. Therefore, some companies adopt the strategy of alkali-breeding chlorine, and their production enthusiasm has not been affected by the decline in PVC profits. Entering April, the start of PVC production by calcium carbide method will gradually resume, and the problem of tight market supply is expected to be alleviated.

　　 Terminal demand performs well

　　 Affected by the epidemic, the production and trade of PVC abroad have been affected, and the degree of dependence on my country’s PVC demand has increased. According to data released by the General Administration of Customs, PVC imports in February were 19,600 tons, a year-on-year decrease of 32.78%; PVC exports were 144,600 tons, a year-on-year increase of 386.87%. According to forecasts by relevant agencies, domestic PVC exports in March were about 160,000 tons, an increase of 88.9% year-on-year, while imports decreased to about 21,000 tons, mainly from raw materials processing. Under the background that the global epidemic has not been effectively controlled, the trend of a substantial increase in PVC exports will not change, directly increasing the domestic demand for PVC.

　　 In terms of downstream demand, the overall trend is stable and improving. Affected by the high level of completion of new houses and infrastructure construction, orders for PVC PIPES performed well, market demand was stable, and the starting load of pipes was higher than the same period in previous years. Not only that, but the flooring, medical and other fields also performed well, further boosting the demand for PVC. It should be noted that it is difficult for the downstream of PVC soft products and cables to transmit the cost brought by high-priced PVC to the downstream, which makes some downstream maintain a low inventory production method, so there are certain hidden dangers in high-priced PVC at present.

　　 In March, domestic PVC production load decreased, exports increased, and demand improved, resulting in low PVC inventory. As of March 26, domestic PVC social inventory has decreased by 40.42% year-on-year. Among them, the social inventory in East China decreased by 31.28% year-on-year; the social inventory in South China decreased by 54.61% year-on-year. Low inventory makes it difficult to increase the demand for downstream replenishment, which forms a certain support for PVC prices.

　　 Based on the above analysis, as the tight supply of calcium carbide eases, the supporting role of cost for PVC has begun to weaken, but rising exports and low inventory have provided support for PVC prices, and PVC has thus fallen into a dilemma. Under this circumstance, the author believes that the probability of high-level oscillation of PVC prices in the later period is relatively large, and the oscillation interval may be 8300-9300 CNY/ton.