PVC price is expected to callback in the future

Affected by the tight supply, PVC prices rose sharply. At present, PVC load cannot be greatly increased in a short period of time, but due to the influence of weak demand, the price may drop slightly. However, in the medium and long term, the tight supply pattern is difficult to change, and PVC is expected to continue to rise.

 

Supply elasticity is too small

 

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At the end of 2015, the government put forward the supply side structural reform plan of “three removal and one compensation”, and began to implement the elimination of backward production capacity by means of environmental inspection in 2016. In the supply side structural reform, PVC is greatly affected. Some PVC production enterprises are forced to stop production because they still use high mercury catalyst, and domestic PCV supply is gradually declining. At the same time, Western European countries are also phasing out PVC devices with mercury containing process, and the supply gap can only be completed by importing PVC from China, which makes China gradually change from a net importer of PVC to an import-export balance or even a net exporter in recent years. The supply is in a tight balance state as a whole, and the supply elasticity is smaller than other chemicals.

 

In April, the 400000 ton plant in Dongxing, Inner Mongolia has been shut down due to failure. So far, Yangmei Xiyang, Yunnan nanphosphorus and other plants have also been overhauled (at present, they are still not back to production). The domestic PVC starting load has dropped to a low level (about 65%) in recent years, and the market has been forced to consume inventory to meet the supply gap. At the end of October, the Inner Mongolia triple unit failed to shut down, and the domestic PVC supply further declined. Recently, affected by environmental protection, the starting load of 1.3 million tons of production capacity of Xinjiang Tianye dropped by 1 / 3, which is expected to last for one month.

 

Fall into the out of stock phase

 

Due to the fact that the growth rate of real estate construction area this year remains at a high level of about 9%, and the warm winter weather in the north makes some projects shut down later than in previous years, resulting in the PVC slack season and stronger demand performance than expected. In this case, the supply of domestic PVC is in short supply, the social inventory continues to decline, and the price correspondingly rises. As of November 29, the social inventory of PVC in East China was 59300 tons, down 41700 tons from the same period last year, down 41.29%; the social inventory of PVC in South China was 8000 tons, down 76.47% from the same period last year. Social inventory continued to decline, especially in South China, which was at a low historical level, causing the market to fall into a phased shortage stage.

 

High production profit

 

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With the rising price of PVC, the profit of PVC production enterprises by calcium carbide process is at a high level. At present, the profit of PVC production by domestic calcium carbide process is about 1500 yuan / ton, which is a high point in recent years. Under the condition of high profit, the production enthusiasm of enterprises will rise, but most of the domestic devices for parking and maintenance cannot be produced due to device failure or environmental protection and other factors, so even if the production profit is at a high level, the progress of market supply recovery is relatively slow. The author believes that this phenomenon will last at least until after the Spring Festival, and it is difficult to fundamentally improve the current situation of tight market supply.

 

However, from the perspective of demand side, although the demand performance of PVC this year exceeded expectations, it is inevitable that demand will drop under the influence of seasonal off-season. At present, the starting load of PVC downstream pipe is 50-70%, and that of profile is 60-80%. The enterprise said that with the demand weakening, the recent order quantity is limited, and the downstream will further reduce the load later, which will continue after the Spring Festival. At the same time, the cable and medical equipment industry, which is not seasonal, has also resisted the high price of raw materials and adopted the strategy of “buy now, use now”. The author believes that although it is difficult for the starting load of enterprises to recover in a short time, it is impossible to further reduce. At the same time, with the seasonal decline of the consumer end, the short-term market short of demand is expected to ease the situation.

 

Imports are lower than last year

 

In the long run, the supply of PVC in China is in a tight balance, and the potential market supply is limited. In terms of import, although the PVC anti-dumping duties against the United States, Japan, South Korea and other countries are no longer imposed in China since the fourth quarter, the arbitrage space has been closed for a long time due to the strong foreign market price, which makes the domestic import volume this year lower than that of the same period last year, and it is difficult to make up for the market supply pressure in a short time. In addition, the issuance of special bonds in advance by the government is intended to strengthen the construction of infrastructure, so as to boost the enthusiasm of the market, which makes the demand for PVC still guaranteed in 2020, so it is expected that there is limited downward space for PVC.

 

To sum up, the main reason for the sharp rise in PVC price in this round is the device failure and the tight supply end caused by the environmental inspection. At present, there is no possibility of further deterioration at the supply side, and there is a decline expectation at the demand side. In this case, PVC will enter the stock accumulation cycle, and the price is expected to callback. However, on the whole, PVC supply is in a tight balance state. Under the background of infrastructure increase in 2020, the pattern of strong price is difficult to change, so it is advisable to adopt the strategy of short term and long term.

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