August 31 news
I. Price Dynamics
1. Futures (DCE PVC main contract): Today saw a significant rise, closing at 4791 CNY/ton, with a price increase of 6.00%. Trading volume was high, reaching 1.7184 million lots, indicating clear end-of-month fund competition.
2. Spot (calcium carbide method SG-5)
According to the commodity analysis system, the single-day price increase for calcium carbide method SG-5 in East China is 4.28%, with the ex-factory price of calcium carbide method SG-5 in East China around 4650 CNY per ton. The spot price for ethylene process is 4850-5000 CNY per ton, with the price difference remaining high.
Spot prices have risen significantly, with fewer offers from traders who are holding back on sales. Many dealers are negotiating deals on a case-by-case basis, but there is not much willingness to chase higher prices.
2. Supply Side
The overall industry utilization rate stands at 65-67%, remaining relatively low. The calcium carbide method’s utilization rate is also below 70%, while the ethylene process operates at around 60%. Currently, we are in the peak maintenance period for August, during which some enterprises have been forced to cut production due to losses, leading to a marginal contraction in short-term supply. Most of this maintenance is seasonal; as maintenance units gradually resume operations starting in September, supply is expected to rebound, and the current supply contraction is unlikely to be sustained. In terms of profitability, both the calcium carbide method and the ethylene process are operating at loss levels, prompting enterprises to reduce output and stabilize prices.
Raw Materials: The price of calcium carbide is fluctuating, while the cost of thermal coal provides a floor support. Ethylene prices are expected to be highly volatile due to geopolitical disruptions in international crude oil markets.
3. Demand Side
The low operating rate of downstream products is still the fundamental reason for the current industry downturn, with overall operations below 40%, lower than in previous years during the same period; pipe materials are weaker due to the slowdown in new real estate starts; profile materials are slightly supported by renovation and refurbishment, but the increase is limited. Downstream demand is mainly driven by just-in-time purchasing, with no large-scale active inventory replenishment; low prices have stimulated some low-level stockpiling, but there has been no significant recovery in actual demand. External demand remains pessimistic: trade barriers in India, increased ocean freight costs, and weak export orders make it difficult to offset the insufficient domestic demand in China. The market is waiting for the peak season of "Golden September" to verify expectations, which have not yet materialized.
Future Outlook
PVC analysts believe that the reason for the significant price increase today is twofold: first, the previous price decline was excessive, leading to a cost valuation recovery due to deep losses in the industry; second, maintenance in August has led to expectations of short-term supply contraction.
In the later period, the height of the short-term rebound may be limited. Costs provide bottom support, but the actual demand in China is weak, and social inventory is high. There is a lack of favorable factors to support a continued sharp rise, and it is highly likely to oscillate within a range; the strength of the spot price increase will be weaker than that of the futures.
Later, attention needs to be paid to whether production recovers after the September maintenance ends; and whether there is a substantial improvement in production and orders during the peak season in September for downstream industries in China.
