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Under the influence of favorable macro policies, the demand for PVC is slowly increasing, and the market has certain confidence in the demand, and there may still be some replenishment actions in the downstream.
Recently, the price of PVC has fallen to the lowest level in the same period of five years, but downstream enterprises are still looking for low purchases. If the spot price rises a bit, the market transaction volume will be pulled down. Since the demand for pipe profiles is constrained by the sluggish real estate sales, and the current real estate hot topics continue, after the financing is liberalized, various measures follow one after another. Therefore, the PVC product is constantly switching between policy expectations and reality, and the price trend of PVC is often confusing.
What factors affect the price of PVC?
From the perspective of inventory and pre-sales, after the holiday, the upstream and midstream inventories have experienced double declines in a week, and this week they have turned into social inventory accumulation, factory warehouses have been slightly destocked, and the market is still looking for low purchases. At the same time, the growth rate of enterprise pre-sales has slowed down significantly.
From the perspective of cost and profit, the cost support weakened in February, the price of calcium carbide dropped significantly, the ex-factory price stabilized in the short term, and the factory dropped regionally. At present, the comprehensive profit of the calcium carbide method chlor-alkali purchased in Shandong has been restored. It is difficult for caustic soda to replicate the rising market in 2022 in 2023, because 2022 will have the double benefits of a large amount of exports and a large amount of downstream alumina production. In 2023, there will be a weakening trend in exports, and the price trend of caustic soda will be downward. Therefore, the time to use alkali profits to balance PVC losses may no longer exist.
From the perspective of supply, last week, the capacity utilization rate of PVC production enterprises increased by 1.05% to 78.59% month-on-month, a year-on-year decrease of 1.87%. Under the support of policy expectations and exports, integrated enterprises started operations at a high level. And before the maintenance season from April to May, there is a high probability that PVC will maintain a high start-up unless there are special circumstances.
From the perspective of demand, in terms of domestic demand, macro policies affect the logic of expected increase in demand, and there are certain speculative inventory replenishment behaviors in the downstream. However, the overall orders for downstream products are currently not many, limiting the amount of goods taken. In terms of export demand, the peak demand season in India is from November and December to April and May of the following year. At the same time, the high price of goods in the United States and the increase in the price of Formosa Plastics in Taiwan are good for mainland exports.
On the whole, under the influence of favorable macro policies, the demand for PVC is slowly increasing, the market has certain confidence in the demand, and there may still be some replenishment actions in the downstream. However, the weak reality of large inventories has led to greater pressure on PVC prices. Due to the firm pricing in the upstream, the cost for traders to obtain goods is high, while the sentiment of seeking low prices in the downstream remains unchanged, and traders are in a dilemma as the middle reaches. As a result, the trade market and manufacturers' shipments have obvious discontinuities, and the industry's inventory destocking speed is slow.
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