August 21 news
I. Price Trends
This week, the PVC market in China first rose and then fell. The futures market rebounded in the middle of the week but dropped again by the weekend. The spot market saw limited changes, with mainstream SG-5 spot prices remaining in a low range. According to the commodity analysis system, the PVC price in China decreased by 0.63% this week.
Futures: The main PVC contract started the week at 4,496 CNY/ton, reached a high of 4,782 CNY/ton mid-week, and fell back to around 4,540 CNY/ton by the end of the week. The overall trend was range-bound with intense long-short battles, and the process of rolling over positions continued.
Spot: As the weekend approaches, the mainstream price of SG-5 in East China is 4,450-4,520 CNY/ton; the fluctuation of spot prices is much smaller than that of futures. Traders are selling according to the market, and downstream buyers are making small purchases at lower prices, with little interest in stockpiling large quantities.
II. Factor Analysis
Supply Side: With the maintenance period not yet over, the operating rate remains at a medium-low level in China.
This week, the plant maintenance in the industry is still ongoing. Devices of Inner Mongolia Junzheng and Xinzhongjia are still in the maintenance cycle. Some of the previously inspected devices are gradually planning to resume production, with the overall operating rate maintained above 70%. The maintenance is expected to gradually end in late August, and there is an expectation of an increase in operations later on, posing a risk of increased supply pressure.
Calcium carbide method: Affected by corporate losses, there has been a rise in proactive capacity reductions and maintenance activities, resulting in an operating rate exceeding 70%. Disruptions in power supply from Northwest China have indirectly impacted the supply of calcium carbide, causing calcium carbide prices to remain stable. Enterprises using the calcium carbide method continue to operate at a loss.
Ethylene process: Affected by geopolitical fluctuations in international crude oil prices, ethylene feedstock costs have been volatile. The ongoing and recurring tensions between the U.S. and Iran continue to disrupt cost expectations, leaving the ethylene process in a state of loss. Plant load flexibility is adjusting in line with maintenance schedules.
Demand Side: Seasonal Impact Leads to Overall Weak Performance
We are now at the tail end of the traditional off-season. Overall downstream operations remain at low levels, with significant structural differentiation. For pipes and tubes: Affected by weak new construction starts in the real estate sector, operating rates have stayed around 30%. Orders are insufficient, and pipe and tube manufacturers are primarily relying on rigid-demand procurement, keeping raw material inventories at low levels. For profiles: Performance is slightly better than that of pipes and tubes, with operating rates approaching 40%. Some orders come from renovation and retrofit projects aimed at upgrading existing stock, but the incremental demand remains limited. Exports: Overseas demand remains subdued, compounded by trade barriers in certain regions. As a result, export orders showed no significant month-on-month increase, making it difficult to generate strong upward momentum. Downstream businesses generally remain cautious, with few actively replenishing inventories. A genuine improvement in demand will likely need to be confirmed during the traditional peak season in September.
Inventory: Inventory is still operating at a medium-high level in China.
This week, PVC continued the trend of inventory clearance, but with limited effectiveness. Currently, the absolute value of inventory is high, and it is difficult to fundamentally alleviate the market supply pressure. The upstream factory inventory has slightly decreased; however, social inventory depletion remains challenging, putting pressure on prices. Overall, the extent of inventory reduction is limited, mainly relying on upstream maintenance and production cuts, rather than increased purchasing demand from downstream.
Cost aspect:
Calcium carbide: Prices in major producing regions remain stable, while power supply conditions at power plants have become a key variable affecting calcium carbide prices. Although costs provide bottom support for PVC, upward momentum remains insufficient. According to the commodity analysis system, calcium carbide prices rose by 0.41% this week. As shown in the chart, calcium carbide prices have now reached a temporary peak.
3. Outlook for the Future Market
It is believed that in the short term, PVC will still mainly follow a range-bound fluctuation pattern, and the supply and demand fundamentals are difficult to change. In the short term, it is hard to see a one-sided trend. On one hand, production enterprises continue to incur losses, and production cuts support prices, locking down the downward space. On the other hand, high inventory levels combined with weak demand make it difficult for the market to break through and move upward. Overall, the market trend in the coming week is expected to remain within a range-bound fluctuation.
