July 31 News
This week (July 27-31), PVC showed a synchronized decline in both spot and futures markets. The short-term speculative trading driven by the geopolitical premium of crude oil in the Middle East has completely subsided. Weaker costs, a slight increase in supply, and weak demand from the terminal construction sector during the off-season have formed a triple pressure. Spot prices generally fell throughout the week, and the focus of futures continued to shift downward. High inventory levels limited the room for rebound, and market transactions remained at the level of basic needs, with a "buy on dips, not on rallies" mentality. Overall, the market was in a weak oscillation pattern, characterized by weak supply and demand and easing costs.
I. Futures Market
On Monday (July 23), the closing price was 4,618 CNY/ton; on Friday (July 31), the closing price was 4,479 CNY/ton. For the entire week, prices cumulatively fell by nearly 140 CNY/ton. During the week, prices dipped as low as 4,438 CNY/ton, repeatedly hitting new intraday lows.
2. Spot Market
As of Friday, the mainstream price for the calcium carbide method SG-5 grade in East China was reported at 4,420–4,470 CNY per ton. This week, spot prices across all regions nationwide generally declined, with price reductions ranging from 80 to 120 CNY per ton. According to the commodity analysis system, the weekly price decline for the calcium carbide method SG-5 in East China reached 3.05%. Traders are offering discounts to facilitate sales, while downstream users are only replenishing their inventories in small batches to meet immediate needs, with no large-scale stockpiling taking place. As a result, market transactions remain sluggish.
III. Factor Analysis
Supply Side: A slight increase in production as companies resume operations, leading to a marginal increase in supply pressure in China.
This week, the overall capacity utilization rate for PVC exceeded 70%, continuing to recover from last week. Maintenance facilities resumed production in a concentrated manner, increasing the supply of goods from China; the operating rate of the ethylene process slightly decreased, and due to fluctuations in the cost of ethylene, coastal facilities proactively controlled production, still remaining at a historical low.
Raw Material Costs: Calcium Carbide Prices Decline, Leading to Weak Cost Position
Calcium Carbide: Calcium carbide prices have declined, with ample supply. The upstream semi-coke market is stable, and calcium carbide producers are eager to sell. The production cost of PVC using the calcium carbide method has decreased, slightly easing the pressure of losses for companies, and there is a lack of strong support from the cost side. According to the commodity analysis system, the price decrease of calcium carbide is significant, with a weekly decline of up to 3.28%.
Ethylene: The U.S.-Iran temporary ceasefire has led to a sharp drop in international crude oil prices this week, driving down ethylene feedstock costs. Consequently, coastal ethylene-based PVC production costs have also declined accordingly. While ethylene-based PVC plants are seeing shrinking profit margins, the lack of upward pressure on costs prevents them from raising PVC prices.
Demand Side: Both domestic and external demand are weakening, and the market is entering the off-season.
Downstream production in China has seen a comprehensive decline this week, with operating rates remaining low—generally around 40%, significantly lower than the average for the same period in previous years. The sluggish real estate market has hit sectors such as profiles and pipes across the board. Additionally, downstream industries like doors and windows and home decoration have also been weighed down, leading to a drop in upstream PVC demand. Terminal distributors are generally slowing down their raw material purchases as they work to clear existing inventories.
On the export front, data were lackluster; there was no increase in inquiries from Southeast Asia and India. China's PVC export profits edged lower, and foreign trade struggles to offset the country's surplus supply, limiting the export's role in providing support.
4. Future Market Forecast
From the perspective of PVC analysts, in the short term, on the supply side: there is still an expectation of increased production, demand is difficult to improve during the off-season, and high inventory continues to suppress; the cost side may provide support, limiting the downward space later. Weak demand leads to ongoing inventory accumulation. Overall, the main approach for next week will be range-bound fluctuations, with unilateral market trends unlikely to occur.
