Can the seasonal rise of PVC come as scheduled?

After a sharp decline in May, the domestic PVC market gradually stabilized and rebounded in June. Seasonal trend shows that there will be seasonal upward trend from the end of June to the middle of August in recent years. Under the background of increased peripheral pressure in 2019, can we get out of the seasonal upward trend again?

Melamine

1. Supply keeps a low growth rate and supply pressure is relatively limited.

Since 2019, production capacity has been put into operation, including Shaanxi Beiyuan, Shanxi Ruiheng, Ningxia Jinyuyuan, Taizhou, a total of 700,000 tons, and there are still 740,000 tons of plant planned to be put into operation in the later period.

In terms of output data, the cumulative output in January-May 2019 was 790.307 million tons, an increase of 1.28% over the same period last year. Due to the high amount of spring overhaul in the year, the loss of spring overhaul (April-July) increased by about 200,000 tons compared with 2018. For the whole year, if the level of monthly maintenance in the later period is roughly the same as that in 2018, the growth rate of supply in the whole year will be about 3%.

From the point of view of overall supply and demand, although the demand performance is not good, the expected demand still maintains a year-on-year growth trend. The probability of tight balance between supply and demand throughout the year is higher. Serious imbalance between supply and demand is not expected. The price fluctuation range is expected to be the same as in 2018. The seasonal peak seasonal rise in 2018 started at the end of June and reached around 7500 in early August. The expected seasonal rise still exists in the year, but the rising space is expected to be lower than that in the third quarter of 2018.

EDTA

2. Stop the Spot Drop and Stay Steady, Transaction Volume

From the perspective of PVC basis difference, the base difference has changed from strong to weak since mid-June, and futures are almost flat. After the end of the overhaul in July, construction starts to pick up, the pressure on the spot supply will increase, and futures may weaken in the latter period due to the expectation of the peak season.

3. The peripheral situation eased and market confidence resumed.

Influenced by the good news from Sino-US trade, the trend of commodities stopped falling and rebounded, the market was expected to restore, and the impact of PVC also rebounded. At the same time, considering the seasonal trend, the current time node has the expectation of gradually building the bottom. If the macro-level is stable in the later period, then in chemical products, because of the balance of supply and demand, it can be used as a multi-head configuration in chemical products.

4. Housing start-up data performed well and expectations remained in peak season.

From January to April, the new housing construction area was 58.552 million square meters, up 13.1%, and the growth rate increased by 1.2 percentage points. Among them, new residential construction area of 433.35 million square meters, an increase of 13.8%.

From the perspective of real estate data, the demand for PVC in September is still supported by the start of real estate construction from January to April, but the support for the 2001 contract is relatively limited.

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5. Summary

From the perspective of the supply and demand pattern of PVC, the supply side in the first half of the year hedged the supply increment brought about by the putting into operation of some production capacity because of the much higher spring overhaul volume than the same period in previous years. It is estimated that the supply growth rate will be 1.58% in January-June and 3.3% in the whole year. On the demand side, the growth rate of demand is expected to be weaker than that of the past two years, but the growth trend is maintained. Supply and demand are expected to maintain a tight balance throughout the year. Prices are expected to rebound in the peak season of the third quarter, but it is difficult to break through the 2018 high in the year. The 09 contract can try to do more at the low. Long-term fundamentals, demand-side as a result of the downward trend of real estate is difficult to change, in the late sales end to start, will play a restraining role in the long-term demand, the 2001 contract can be empty run.