PVC: The supply and demand pattern has changed, and there are expectations of a decline

At present, power rationing in the northwest region affects the supply of calcium carbide, and cost support makes the price of PVC likely to fluctuate at a high level in the short term. Looking ahead to the future, PVC manufacturers in the early stage of maintenance have resumed production one after another, and downstream demand has not performed well. The pattern of PVC supply and demand has changed, and the probability of a later decline is greater.

　　 Cost support is still there

At present, due to the shortage of power supply, the main production areas of calcium carbide in Inner Mongolia and Ningxia have imposed strict restrictions on industrial electricity, especially high-energy-consuming industrial electricity, under the influence of the “dual energy consumption control” policy, which makes the Northwest Regional calcium carbide manufacturers are basically facing the problem of irregular production restrictions, so the tight supply of calcium carbide is difficult to change. However, as the downstream PVC start load increases, the market demand for calcium carbide will increase. At the same time, due to the mismatch of supply and demand, calcium carbide will continue to struggle to destock. Therefore, the pattern of strong calcium carbide prices will not change, and the cost-side support for PVC prices will continue.

　　At the same time, major global economies are gradually getting rid of the impact of the epidemic, the economy is showing a sustained recovery trend, and the market demand for crude oil will continue to increase in the later period. In addition, although Iran’s nuclear negotiations are progressing smoothly and Iran’s crude oil will re-flow into the market in the later period, under the effect of OPEC+'s strict production cuts, the tight global crude oil supply pattern will not change, and crude oil prices still have room to rise. Affected by this, the cost of ethylene-based PVC will also remain high.

　　 supply has increased

　　 In May, due to the shortage of calcium carbide supply and poor production and operation conditions, domestic PVC production companies experienced a relatively concentrated suspension and maintenance, which caused a phased decline in PVC supply, and PVC futures prices continued to rise as a result. In June, the prices of upstream raw materials calcium carbide and vinyl chloride fell, the profits of domestic calcium carbide method and ethylene method PVC production enterprises both increased, and the production enthusiasm of enterprises rose. As of June 4, the gross profit of the calcium carbide method in East China was RMB 1,834/ton, an increase of RMB 650/ton from the previous month; the profit of the ethylene method was RMB 500/ton, an increase of RMB 200/ton from the previous month, and the profits of production enterprises were restored.

　　Affected by the improvement of the operating conditions of PVC production enterprises, domestic PVC production enterprises that had been overhauled in the early stage resumed production in late May. However, the domestic PVC production companies with maintenance plans in June include the 400,000 tons installation in Ordos, the 400,000 tons installation in Dezhou Shihua, and the 300,000 tons installation in Shandong Yangmei Hengtong. However, the maintenance involves less production capacity and the maintenance period is relatively long. short. As one trades up and down, domestic PVC supply will show an increasing trend in June.

　　 In addition, domestic PVC inventory is currently at a relatively low level. Manufacturers have less pressure to destock. Downstream companies have low inventory. Inventory is mainly concentrated in the hands of traders. Inventory has a neutral effect on PVC prices as a whole.

　　The demand is hard to pick up

　　Affected by the high temperature, the downstream demand for PVC has entered the off-season, and downstream enterprises all have different degrees of decline. Judging from the currently published data, the domestic profile enterprises have started to load between 50% and 70%, and the load has dropped by about 10% compared with the previous period. Affected by the off-season, the orders of downstream companies are currently limited, mostly with small quantities of rigid orders. If the terminal orders are not followed up in the near future, downstream companies may have a further decline.

　　 In addition to the seasonal decline in consumption, unexpected factors have also affected the production of PVC pipe and profile companies in South China. On the one hand, Guangzhou has discovered the local new crown pneumonia epidemic, and the movement of people in the above-mentioned areas has been restricted, which has affected the production of local enterprises; on the other hand, the restrictions on industrial power use in southern China have affected the production of some downstream enterprises to a certain extent. . On the whole, PVC demand is not performing well due to many factors. The high price of PVC makes it difficult for the downstream to conduct downwards, which makes PVC prices have downward expectations.

　　 Based on the above analysis, with the improvement of production and operation conditions, the operating load of domestic PVC production enterprises has increased, and the supply has shown an increase trend. At the same time, downstream consumption has declined due to seasonal off-season, power curtailment, and the epidemic. Under the above effects, the domestic PVC supply and demand pattern will change from a tight balance to a slight surplus, and PVC prices are expected to fall.

　　In the short term, the impact of limited power supply has greatly restricted calcium carbide production enterprises, and the bottleneck of calcium carbide supply is difficult to break. In addition, the international crude oil price trend is strong, and the cost side provides strong support for PVC prices. Under the background of strong reality and weak expectations, short-term PVC will still show a trend of high oscillations, and a cautiously bearish view on PVC in the medium and long term.