PVC Market Struggles in 'Golden September': Prices Plummet Amid Oversupply and Weak Demand, Market Outlook Grim

With the arrival of the traditional peak season "gold nine", PVC downstream demand has not been fully realized, and the weakness of market supply and demand has caused downward pressure on the domestic PVC market, resulting in a continued decline in prices to find support. Since September, the domestic PVC spot market price has shown a downward trend of shock, in sharp contrast to the market trend in the same period last year. On the supply side, with the end of the overhaul of some devices and restart, the supply reduction caused by the overhaul has been eased, and the social inventory has been maintained at a high level, further aggravating the supply pressure on the domestic PVC market. The performance of terminal demand is weak, the sales of downstream products enterprises are poor, the new orders are insufficient, and the inventory is gradually accumulated, which reduces the willingness of enterprises to stock raw materials. In the absence of substantial positive factors, it is expected that market turnover will remain limited in the short term, and the domestic PVC market will mainly show a sluggish consolidation trend.

The Asian polyvinyl chloride (PVC) market faced a complicated situation in early March 2024, with rising costs and sluggish demand in the downstream construction sector adding to the concerns of market players. Brent crude oil futures prices above $80 per barrel and a sharp rise in upstream ethylene prices over the past two months have contributed to the increase in production costs. Despite the bullish factors on the cost side, supply concerns, especially from China, could dampen the continued upward trend in PVC regional prices.

In China, the ongoing downturn in the real estate industry has led to weak demand in the PVC market and led to a large export supply. In terms of production, no major problems are expected in China, where maintenance turnover is at a low level in March 2024. In March 2024, Yichang, Hubei Province, plans an 11-day overhaul of a PVC plant with a total capacity of 10,000 tons/month, while Wanhua Chemical plans an eight-day shutdown of a plant with a total capacity of 33,333 tons/month.

However, downstream companies are expected to resume operations after the Lunar New Year holiday, which could boost domestic demand. After a large Taiwanese producer raised prices in March, Chinese sellers also raised their offers. Despite the increase, the price of PVC in China has not declined significantly in the Indian market. Sellers remain confident in the cost support of PVC prices.

The latest analysis shows that the imported PVC market in India, China and Southeast Asia is currently at a 4 to 6 month high. A Chinese trader expects a volatile trend in the Chinese market in the near term, while a producer noted that domestic supply remains ample and downstream purchases remain limited.

Southeast Asian markets showed a similar pattern, supported by higher upstream crude oil and feedstock prices in March for major producers in Taiwan. However, buyer resistance is evident. One Indonesian company highlighted an increase in demand after the holidays, but noted that buyers were resistant to sharp price increases. Due to the cautious attitude to the weak demand for end products, Southeast Asian manufacturers mostly took a wait-and-see attitude, although Taiwanese manufacturers raised prices, but still maintained price stability.

According to ChemAnalyst, the Asian PVC market appears to be at a crossroads in the coming weeks, navigating between rising costs and supply-side challenges. While cost dynamics favor the upward trend, buyer resistance and concerns about adequate supply pose challenges to the continued growth of the market. Market participants are closely watching these factors to observe the future direction of the PVC market outlook in the Asia-Pacific region.

Entering 2024, the domestic PVC market continues to face the pressure of new production capacity, although some integration projects are expected to be put in the second half of the year, but under the new normal economic environment, the market atmosphere is difficult to improve in the short term, even if the export growth rate is considerable, it is difficult to change the domestic market supply and demand weak situation. Given that the current valuation has reached an extremely low historical level, the space for spot prices to continue to decline may be limited in stages, and the market may continue a weak balance. The trend of the futures market is uncertain, and it is still necessary to be vigilant about risks. Although the gold nine season has arrived, but in view of the weak terminal demand, signs of simultaneous slowdown in exports, and industry supply expectations to increase, it is difficult to see a significant improvement in market conditions in the short term, the contradiction between supply and demand still exists, so for industry people, it is not appropriate to excessively expect a strong rebound in the market. Although the bottom of the market may have appeared, the upward momentum is insufficient, and the market deadlock needs to be broken.