This Week's PVC Market Rises and Then Falls (2.2-2.6)

February 6 news

I. Price Trends

This week (Feb 2-6), the price of PVC in China continued to rise. According to the commodity analysis system, the weekly price increase for PVC calcium carbide method SG-5 was 1.10%. The price increase was mainly driven by the futures market, with insufficient support from the fundamentals, resulting in a situation where the "futures were strong, but the spot market was weak." As the weekend approached, the overall sentiment in the commodities market cooled down, and most commodity prices experienced a weak correction, leading to a halt in the rise and a decline in the PVC market. Data shows that the current market price for PVC calcium carbide method SG-5 in the East China region is in the range of 4,750 to 4,800 CNY per ton.

II. Market Analysis

Supply and Demand: This week, the spot market for PVC in China showed weak supply and demand. However, at the beginning of the week, the spot market surged driven by the futures market. Nevertheless, the supply and demand situation remained weak, with soft downstream demand and a decline in export volume. Additionally, on the supply side, the operating rate of PVC this week slightly decreased, with some enterprises operating at less than 50% capacity. Therefore, as the weekend approached, under the pressure from the futures market, PVC prices began to correct. Besides, this was mainly due to the decrease in trading volume and the shift in market sentiment.

From an inventory perspective, as the Lunar New Year approaches and the festive atmosphere intensifies, downstream procurement has slightly slowed down. Social inventories remain at a moderate to high level. Given the currently large base inventory volume, the spot supply of PVC continues to stay relatively abundant.

Cost side: This week, the market price of calcium carbide in China rebounded from a low, and the market has re-entered an upward channel. According to monitoring, the weekly price increase of calcium carbide in China this week was 0.39%. The increase in downstream procurement volume had a certain stimulating effect, and the cost still has advantages, providing support for PVC.

III. Future Market Forecast

Supply side: The operating rate has slightly increased, leading to a moderate increase in supply pressure.

Next week, China's PVC industry is expected to see a slight increase in production, mainly due to the gradual resumption of maintenance units—such as those at Wanhua in Fujian and Hengtong in Shandong—which will lead to an increase in supply. However, overall, as the Spring Festival approaches, most companies will maintain their current production pace and will not significantly expand production. The supply pressure will only increase moderately, having a limited suppressive effect on prices.

Demand side: Domestic demand enters the off-season, and export expectations are set to decline.

On the domestic demand side, downstream PVC enterprises in China will gradually enter a shutdown and holiday mode, with operating rates continuing to decline. End-user procurement demand is further shrinking, making it difficult to provide effective support for spot prices. On the export front, next week the Asian market will officially announce the March PVC contract prices. Currently, market sentiment is heavily characterized by wait-and-see attitudes, and most foreign trade companies are adopting a wait-and-see approach. It is expected that the volume of export orders will continue to decline, making it even harder to ease the pressure on China’s inventory levels.

In summary, it is believed that the PVC market in China will gradually enter an adjustment phase before the Spring Festival holiday next week. There will be a slight increase in operating rates, which will counterbalance the continuous weakening of demand, while the cost side remains generally stable. The sentiment in the futures market is expected to become more subdued. It is anticipated that the market will mainly focus on maintaining stable prices and observing, with prices fluctuating within a narrow range. Close attention should be paid to factors such as the progress of maintenance units resuming production and the procurement pace of downstream buyers.