The trend market of PVC resin has not come yet

With the end of winter and the easing of transport capacity tension during the Spring Festival, the structural shortage of calcium carbide in East China has been improved. At present, under the influence of cost reduction and weak supply and demand, the domestic carbide price has dropped. As of February 16, the spot median price of calcium carbide in East China was 4175 yuan/ton, down 225 yuan/ton from the stage high before the Spring Festival, with a decline of 5.11%. In addition, although the price of calcium carbide has fallen, the production and operation of calcium carbide production enterprises are still in a state of slight loss due to the weakening of the price of blue carbon in the upstream of calcium carbide, and the enthusiasm of production has not decreased, which makes some regions accumulate stocks. The author believes that in this state, the price of calcium carbide will continue to be weak in the later period, and the supporting role of PVC resin at the cost end may be weakened.

The supply side presents a phased loose situation

Since the second half of 2022, due to the general performance of the terminal real estate market, the problem of oversupply of PVC resin powder has become prominent, and the social inventory has continued to rise. In this case, the PVC resin production enterprises were forced to reduce the price and reduce the inventory pressure. As the price of PVC powder dropped sharply, the PVC production enterprises by calcium carbide method have been in a state of continuous loss since the second half of 2022. As of February 16, the average loss of domestic calcium carbide PVC production enterprises was 315 yuan/ton. However, affected by the recent drop in calcium carbide prices, PVC prices have risen steadily, and the loss situation of calcium carbide manufacturers has improved, but the overall loss situation has not changed.

The continuous loss has reduced the production enthusiasm of domestic PVC producers, and some enterprises have chosen to stop to avoid the loss risk. The average operating load of domestic PVC production enterprises in the first half of 2022 is 79.56%, and the operating load from the second half of 2022 to now is only 73.96%. As of the week of February 17, the average operating load of domestic PVC production enterprises was 77.54%, down 3.41% from the same period in 2022. At present, although the domestic PVC powder operating load has still not recovered to the same level in 2022, it has increased by 7-8 percentage points from the low point at the end of 2022. The short-term supply of the market has entered the stage of phased easing, which is mainly due to the recent loss reduction of PVC resin production enterprises by calcium carbide method, and the Spring Festival overhaul has not been carried out.

In addition, chlor-alkali belongs to the field of salt chemical industry, and the two are associated. At present, the price of caustic soda is good, and the domestic integrated chlor-alkali enterprises are in a profitable state. As of February 16, the average profit of domestic chlor-alkali was about 800 yuan/ton. In this case, chlor-alkali enterprises insist on production through the strategy of raising chlorine with alkali, which increases the tolerance of PVC production enterprises to operating losses, thus stimulating the recovery of PVC production enterprises.

At the same time, high inventory is also one of the reasons for the greater pressure on PVC supply. Up to now, the social inventory of domestic PVC resin has reached 601500 tons, an increase of 92000 tons and 18.06% compared with the same period in 2022. The reason for the high domestic PVC resin inventory is that the weak demand side makes it difficult to digest the terminal inventory in a short time. At present, the social inventory of domestic PVC is in the rising cycle. With the situation that the supply and demand pattern has not improved significantly and the PVC resin has not entered the destocking cycle, it is difficult for PVC powder to change the weak pattern.

The key to stabilizing the demand side lies in the recovery of the real estate industry

First of all, because PVC downstream products pipes and profiles are mainly used for housing pipes and windows, the performance of the real estate industry has a great impact on the demand for PVC resin. Affected by a series of policies issued by the state to promote the recovery of the real estate industry, the housing prices in some cities have shown signs of recovery recently, and the recovery of the domestic real estate industry has been basically determined, which will have a relatively strong driving effect on the demand for PVC powder. However, it will take several months for the policy to be implemented and transmitted to the industry. At the same time, whether the confidence of the market in the real estate industry can be restored also needs attention. Therefore, it is difficult to determine the extent of the recovery of the real estate industry and the boost of the demand for PVC.

Secondly, as the core factor of economic countercyclical regulation, the growth rate of domestic infrastructure investment will be around 4.5% in 2022. Not only that, although the infrastructure investment in many places in China in the second half of 2022 is postponed to this year, the infrastructure construction is mainly highway and electric power, which has a large demand for asphalt and steel, and has a relatively limited driving effect on the demand for PVC resin.

Finally, in addition to real estate and infrastructure, export is also an important part of the demand for PVC powder. In 2022, the domestic export of PVC resin reached 1.9657 million tons, an increase of 21.14 million tons compared with 2021, and a year-on-year increase of 12.05%. However, the probability of domestic PVC export decline this year is high. The rise of domestic PVC exports in 2022 was mainly affected by two factors: first, the energy crisis in Europe and the United States in the first half of 2022, and the high upstream costs led to the rise of PVC resin production costs. At the same time, the domestic PVC powder production is mainly based on the coal to carbide method. The global energy crisis has limited impact, resulting in the domestic PVC resin price showing some advantages. Second, the production enterprises in the United States reduce the load, and on the contrary, the domestic market is abundant, which promotes the domestic PVC resin supply to gradually flow out. However, with the fall of international energy prices, the price advantage of domestic PVC resin supply is no longer obvious. In addition to the recovery of overseas PVC resin production, it is difficult to continue the performance of domestic PVC resin export in 2022 this year. In fact, since the fourth quarter of 2022, domestic PVC resin exports have declined significantly.

On the whole, the current infrastructure construction has a limited stimulating effect on PVC resin, and it is difficult for exports to replicate the performance in 2022. The demand for PVC resin depends largely on the recovery of the real estate industry. However, it is the off-season of the real estate industry, and the implementation of the policy will take time. Although the PVC powder downstream enterprises have started to recover, there is no obvious sign of improvement compared with previous years. In recent years, domestic PVC profile enterprises have not seen much progress in overall construction. The order situation is not good. The enterprises have sufficient inventory and are cautious in stock preparation. Most of them purchase on demand according to the order. There are few cases of active stock preparation. Demand has a relatively limited role in promoting PVC.

The impact of vinyl chloride leakage in the United States on the market is limited

On February 3, a freight train derailed in Ohio, causing vinyl chloride leakage. Vinyl chloride is a raw material for polymerization and production of PVC. It is also a toxic substance with active chemical properties. In order to prevent residents from inhaling toxic substances and avoid potential hazards, the United States government evacuated surrounding residents. The annual output of PVC resin in the United States is about 7 million tons. Although the output is less than that of China, it is the largest exporter of PVC resin in the world. The occurrence of this event will trigger the United States to strengthen its control over the transportation of vinyl chloride, which will have a certain impact on the production and export of PVC powder. However, at present, the impact of this event on global PVC resin trade is limited.

Based on the above analysis, the fundamentals of PVC resin are still not optimistic. The upstream calcium carbide price fell, the supply was sufficient, and the support of PVC resin at the cost side was limited. In terms of supply, affected by the fall in the price of calcium carbide, the loss of PVC production enterprises using calcium carbide method has narrowed, and the price of caustic soda has performed well. The chlor-alkali enterprises have adopted the strategy of raising chlorine with alkali to further ensure the supply of PVC resin, which makes it difficult to solve the problem of high inventory of PVC powder at present. In terms of demand, the stimulation of infrastructure investment on PVC resin is limited, and the export is expected to decline strongly. The recovery of PVC resin demand mainly depends on the recovery of the real estate industry. Although the government has issued a series of policies to stabilize the real estate industry and the market has basically reached a consensus on the recovery of the real estate industry, the recovery of the real estate industry still needs to be verified by follow-up data. At present, the real estate stabilization policy has a very obvious role in promoting the downstream enterprises of PVC resin.

In this case, the expected recovery of the real estate industry made the market have a good imagination about the demand for PVC resin, but the supply and demand pattern of PVC resin itself has not been significantly improved, and even there is a slight sign of weakening due to the impact of the rebound in the starting load of PVC resin. Therefore, the author believes that under the combined effect of weak reality and strong expectations, the PVC resin futures price is difficult to get out of the trend market, and the future market will continue to fluctuate, waiting for further clear signals from the market.