Introduction
The continuous decline in PVC resin market prices in August has led to a gradual decrease in the gross profit of PVC resin enterprises. However, due to the differences in raw material changes in different processes, there are also differences in the valuation of different process enterprises. The valuation of ethylene based PVC resin production enterprises is at a low level in recent years, while the valuation of calcium carbide based PVC resin still has some room for historical lows.
In August, the PVC resin powder market experienced a continuous decline in prices and industry profits due to macroeconomic weakness and poor fundamentals. However, there were slight differences in the trends of raw materials for different processes, resulting in varying gross margins among different process enterprises. Below is a detailed analysis based on different process conditions.
Increased losses of PVC powder enterprises using calcium carbide method
Since August, the losses of PVC resin produced by calcium carbide method have gradually increased. Taking the externally purchased calcium carbide method PVC production enterprises in Shandong region as an example, as of August 15th, the gross profit was -525 yuan/ton, an increase of 121 yuan/ton from the losses at the end of July.
The main factor affecting the gross profit of PVC produced by calcium carbide method is that the price of calcium carbide has slightly decreased, and the cost of PVC has slightly decreased, but the decrease is relatively small compared to the factory price of PVC. The main reason for the decline in the price of calcium carbide is the maintenance of PVC production enterprises in Wuhai and other places, the increase in the delivery volume of supporting calcium carbide, and the continuous increase in the inventory of calcium carbide arrivals. Therefore, the purchase price has been lowered. However, considering the pressure on calcium carbide enterprises, the extent of the reduction is limited.
Another factor affecting the gross profit of PVC powder produced by calcium carbide method is the continuous decline in PVC prices. The fundamental performance of PVC resin prices is poor, with reduced supply side maintenance and a slight increase in production. In addition, domestic demand is in the off-season, and exports are gradually improving. However, India is still affected by policies and has not yet increased production, with inventory at a high level. In addition, the macro atmosphere is biased, and the overall situation of bulk commodities is weak, which also has a certain negative feedback on the trading atmosphere of PVC resin powder.
Increased losses for PVC resin production enterprises using imported VCM ethylene method
In August, the losses of PVC powder enterprises importing VCM method continued to increase. As of August 15th, the gross profit of VCM enterprises importing VCM in East China was -385 yuan/ton, a decrease of 77 yuan/ton from the end of July.
The main factor affecting the decline in gross profit of PVC production enterprises using the VCM method is that the price of PVC produced by the ethylene method has gradually decreased along with the supply of PVC resin produced by the calcium carbide method. On the other hand, the cost of importing VCM enterprises has slightly decreased, but the cost reduction is smaller than the price reduction of PVC.
External purchase of ethylene based PVC resin leads to increased losses for enterprises
The losses of PVC resin powder enterprises that purchase ethylene from outside have gradually increased. As of August 15th, the gross profit of PVC resin powder enterprises that purchase ethylene from outside in East China was -564 yuan/ton, an increase of 156 yuan/ton compared to the end of July. The main factors affecting the gross profit change of ethylene based PVC resin enterprises are the decline in PVC prices and the slight increase in ethylene prices, resulting in a slight increase in the cost of ethylene based PVC resin. The loss of ethylene based PVC powder has reached its maximum in recent years.
The gross profit of PVC integrated enterprises using caustic soda/calcium carbide method has decreased
The gross profit of PVC integrated by caustic soda/calcium carbide method in Shandong region has decreased. On the one hand, the prices of PVC resin, caustic soda, and liquid chlorine have all decreased. On the other hand, on the cost side, the stability of raw material salt has led to a slight decrease in the price of calcium carbide. As of August 15th, the gross profit of Shandong caustic soda/calcium carbide PVC integration was 366 yuan/ton, a decrease of 182 yuan/ton from the end of July. The comprehensive gross profit of caustic soda/PVC is still around the median of the past two years.
In the short term, the gross profit of PVC production enterprises continues to be weak
At present, the gross profit of ethylene based PVC is at a low point in recent years, but with the addition of caustic soda, there is still a slight profit in the overall gross profit. The gross profit of calcium carbide based PVC is still at the median of the past two years. Although the price of PVC is at a historical low, there has not been a significant increase in upstream companies actively reducing production, and there is still an expectation of an increase in PVC industry production in the short term.
From the perspective of gross profit, PVC gross profit will still be difficult to be optimistic. From the raw material side, the price of calcium carbide will not change much in the short term, while ethylene may maintain a relatively high level. There is an expectation of a decrease in VCM import prices. From the perspective of PVC, the fundamentals are difficult to be optimistic, and prices may run at a low level, but the absolute price is relatively low, and there may not be much room for further decline. So it is expected that the gross profit of PVC production enterprises will continue to be weak in the short term.
