August 28 news
I. Price Trends
This week, the PVC market in China continued the downward trend from last week. The futures market remained weak throughout the week, with limited changes in the spot market. The mainstream SG-5 spot prices continued to operate at a low range. According to the commodity analysis system, the PVC price in China decreased by 1.71% this week.
Futures: The main contract of PVC2701 was at 4,673 CNY/ton at the beginning of the week and fell to around 4,515 CNY/ton by the end of the week, with the overall range slightly lower. There was intense competition between long and short positions.
Spot: As the weekend approaches, the mainstream price of SG-5 in East China is 4,420-4,500 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, but there is not much willingness to stockpile in large quantities.
II. Factor Analysis
Supply Side: Operating Rates Remain at Medium-Low Levels
This week, some facilities in the industry are still under maintenance, and some of the previously maintained units are gradually planning to resume production, with the overall operating rate maintained at over 70%. By the end of August, the maintenance will gradually come to an end, and there is an expectation of increased operations later on, posing a risk of rising 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%. Power disruptions in Northwest China have indirectly impacted the supply of calcium carbide, keeping calcium carbide prices 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: Purchasing Remains Weak, Overall Performance is Dull
Currently, it is the end of the traditional off-season, and overall downstream operations are at a low level with significant structural differentiation. Pipes: Due to the sluggish start of new real estate projects, operations are maintained at around 30%, with insufficient orders. Manufacturers mainly focus on rigid demand procurement, keeping raw material inventories at a low level. Profiles: Performance is slightly better than pipes, with operations approaching 40%. Some orders come from renovation and old renovation projects, but the increase is limited. Exports: Overseas demand is flat, and coupled with trade barriers in some regions, there is no significant increase in export orders month-over-month, making it difficult to provide strong support. Downstream players generally adopt a wait-and-see attitude, with no large-scale active restocking. A genuine improvement in demand will need to be validated during the traditional peak season in September.
Inventory: The destocking process will continue
This week, PVC continues the trend of inventory clearance, but with limited effect. Currently, the absolute value of inventory is high, making it difficult to fundamentally alleviate the supply pressure in the market. Inventory in upstream factories has slightly decreased; however, it is challenging for social inventory to be depleted, which puts pressure on prices. Overall, the reduction in inventory is limited, mainly relying on production cuts due to maintenance at upstream facilities, rather than increased purchasing by downstream demand.
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. Costs continue to provide bottom support for PVC, yet there’s insufficient upward momentum. According to the commodity analysis system, calcium carbide prices continued their upward trend from last week this week, though the price increase was limited—this week’s increase amounted to only 0.40%. As shown in the chart, calcium carbide prices have now reached a temporary peak.
3. Future Market Outlook
It is believed that in the short term, PVC may maintain a narrow range of fluctuations, and the supply and demand fundamentals are difficult to change, making it hard for the market to show 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.
