Policy Boosts Show Weak Effects, PVC Market Faces Huge Pressure: High Inventory, Weak Demand, Prices May Continue to Fall

Recently, domestic policies have been frequently released, but the boost effect of these policies on the PVC market is not significant. From the fundamental point of view of PVC, the traditional consumption season is coming to an end, since October, due to the gradual recovery of maintenance devices, the inventory accumulation cycle of the industrial chain has caused pressure on futures and spot market prices. In the short term, the domestic PVC market will continue to face pressure, and the operation situation is more difficult.

At the macro level, the government continued to take measures, for example, before the holiday, the central bank announced to cut the deposit reserve ratio by 0.5 percentage points, reduce the interest rate of outstanding mortgages, and unify the minimum down payment ratio of mortgages. After the holiday, the Ministry of Finance and the Ministry of Housing and Urban-Rural Development also released policies conducive to the real estate market. However, these policies have not yet been reflected in downstream demand orders in the short term, and the boost to the PVC market is limited. With the gradual fading of the policy heat, the PVC market will return to the fundamentals, and prices may continue to show a weak downward trend.

From the fundamental point of view of PVC, although the maintenance device has been restarted, the overall industry's start-up load has remained at a relatively high level, but the improvement of the demand side is not obvious, and the driving force at both ends of the supply and demand is insufficient. The support on the cost side is also more limited, resulting in the fundamental performance of PVC is still weak.

At present, domestic maintenance enterprises are relatively concentrated, Shandong Xinfa, Henan Lianchuang, Shaanxi Jintai, Dezhou Shihua and other PVC devices are in a state of maintenance, which affects the utilization rate of PVC production capacity in the near future, so that it has declined. However, compared to the lows of mid-July and the end of the year, the operating rate remains high, so the overall impact is limited. It is expected that the improvement of domestic PVC capacity utilization rate will be limited next week, and by early November, with the end of some enterprise maintenance and the limited number of new enterprises to join the maintenance, PVC capacity utilization rate may be increased to about 79%.

According to the latest data, the current inventory of the PVC industry (including 41 social inventory and full sample upstream inventory) is 1,264,300 tons, an increase of 0.41%. Newly expanded social stocks (41 samples) decreased by 1% month-on-month to 830,500 tonnes. The preliminary statistics of domestic PVC social inventory (21 samples) decreased by 0.93% quarter-on-quarter to 479,600 tons, an increase of 11.22%. Among them, the inventory in East China was 435,600 tons, a decrease of 0.57% from the previous quarter and an increase of 15.84%. Inventories in southern China were 44,000 tons, down 4.35% from the previous quarter and 20.29% from the previous year.

Despite the recent decline in social inventories, industry inventories remain high. The main reason for the decline in inventory is that the supply of goods in the northwest region is reduced due to the reduction of railway trucks and the decrease in the amount of goods arriving, resulting in an increase in the inventory pressure of the factory warehouse. Therefore, although the PVC supply side is still at a high level, the impact of the overhaul is relatively limited.

At present, the downstream operation situation remains stable. Although it is currently in the traditional consumption season and favorable policies continue, the improvement of the real estate market is still limited. It will take some time for the policy to be transmitted to the demand side. From the perspective of downstream starts and orders, the current increment is limited. Therefore, for the start of various fields, the start of soft products may remain stable, while the start rate of pipe profile companies may continue to remain at a low level. For demand expectations, the market is still cautious, focusing on the impact of policy changes on market mentality, as well as the actual landing performance of downstream demand in the later period.

At present, the demand for PVC in the Indian market is low, and it is expected that demand will pick up after Diwali. In addition, there is news that anti-dumping duties may be imposed in November, which will make it difficult to maintain the price advantage of Chinese sources. In addition, the United States may clear inventory before Christmas, and some supplies may arrive in the Asian market, which will increase the competitive pressure on China's PVC in the international market, and it is expected that the pressure on export signing will increase in the later period.

At present, the mainstream trade price of raw calcium carbide in Wuhai region is stable at 2700 yuan/ton. Calcium carbide enterprises have not yet lost money to the warning line, and the operating rate remains stable. Market supply is greater than demand, resulting in lower downstream procurement enthusiasm. The supply of calcium carbide in Ningxia has gradually increased, and the game between supply and demand has intensified. In terms of ethylene, the US dollar market price is slightly loosened compared with the domestic market, and the overall trend is rising. The buyer is reluctant to sell, the downstream just need to buy, the market discussion is more positive than yesterday, but the actual transaction has not yet been clear news, the market is still waiting for transaction guidance. Considering that the price of calcium carbide has fallen by a large margin, and the ethylene method has a limited increase, so the support on the cost side is somewhat weak.

With the gradual fading of macro support, the PVC market will return to fundamentals. At present, the overall supply of PVC market is still relatively abundant, and the seasonal peak season on the demand side is coming to an end, internal and external demand are facing difficulties, and the basic lack of strong support. In the short term, the market is still expected to be shaken and weak, and market participants should pay close attention to changes in the macro atmosphere.