PVC industry is entering the boom and downturn cycle. In the short term, it is expected that the supply will increase and demand will decrease. In this context, PVC will usher in a short opportunity.
The industry enters the boom and downturn cycle
The upward cycle of PVC industry since 2016 is due to the resonance of supply side capacity cycle and demand side real estate cycle. At the end of 2015, PVC production enterprises experienced a clearance of backward production capacity, which maintained a negative growth from 2014 to 2016. At the same time, the real estate industry, as the largest downstream of PVC, has entered a new boom cycle since 2016, driving industrial products into the active replenishment stage. In this context, PVC price focus has been rising since 2016, industry profits have been improving, and out of the bull market.
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By 2019, new production capacity began to emerge under the current situation of high profits in the industry, and demand side real estate entered a downward cycle. Therefore, judging from the whole industry cycle, we believe that PVC is now entering the downward cycle of industry boom, and the price center of gravity is likely to move down.
Short term seasonal supply increase and demand decrease
PVC upstream production enterprises have two periods of centralized maintenance in one year: Spring maintenance and autumn maintenance. Currently, the upstream is in the stage of autumn maintenance coming to an end. At present, the comprehensive operating rate of PVC upstream is about 72%, lower than 80% of the same period last year. It is expected that the operating rate will gradually rise with the completion of maintenance in the later stage. In addition, in the fourth quarter, new production capacity such as Zhongtai and Julong chemical will release production, so the overall aftermarket supply end pressure will increase month on month. From the demand side, at present, after entering the “golden nine silver ten” off-season, after entering the winter in the northern region, the downstream operating rate will appear obvious seasonal weakness. In terms of both supply and demand, we believe that PVC may have a turning point of accumulation in December.
There is a certain margin of safety in shorting
In terms of profit, due to the outsourcing of raw calcium carbide in North China, the production cost is much higher than that of the northwest integrated device, which is a high cost device in PVC production enterprises. At present, the profit of PVC single product in North China is 500 yuan / ton, and the comprehensive profit of chlor alkali is more than 1500 yuan / ton, so there is a big space for industry profit compression. In terms of basis, since January contract is a traditional seasonal off-season contract, the contract will maintain the status of discount spot over the years. Recently, with the rebound of futures, the basis narrowed to about 150 yuan / ton, which was at a low level in the same period of the previous year. Therefore, from the perspective of profit and basis, there is a margin of safety for short PVC.
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At present, no matter pvc2001 contract or 2005 contract, they have been consolidated and oscillated for nearly three years. In the short term, the 250, 120, 60, 40, 20 and 10 day averages are all downward, facing a choice of direction. In terms of price support and pressure, pvc2001 contract is supported at 6200 yuan / ton line below and 6600 yuan / ton line above; pvc2005 contract is supported at 6000 yuan / ton line below and 6500 yuan / ton line above. In addition, from the analysis of the correlation between varieties, the related varieties closely related to the real estate industry, such as screw steel, power coal, coke, etc., are showing signs of breaking. If resonance occurs, the space under PVC will open.
To sum up, we think PVC is suitable for short. It is suggested to arrange the 2001 contract short order in the 6400-6600 yuan / ton range and the 2005 contract short order in the 6300-6500 yuan / ton range.
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