The supply of PVC in China has declined recently

Introduction

Recently, due to centralized maintenance and load reduction of some production enterprises, the operating load rate of PVC industry has dropped to a relatively low level, and the supply of PVC has decreased. However, due to the continued weakness of the downstream demand side, the spot supply in the market is still relatively loose, and some PVC manufacturers are still facing the pressure of sales and inventory. At present, the demand side has not shown obvious signs of recovery, and there are expectations of weakening in exports. It is expected that the overall situation of supply exceeding demand in August will continue.

Recently, the operating load rate of PVC industry is low

Recently, the operating load rate of the domestic PVC industry has decreased compared with the previous period, and the supply of PVC has decreased. At present, the operating load rate of the PVC industry remains at a relatively low level.

On the one hand, due to the relatively concentrated maintenance of some large plants in the recent period, the maintenance loss is significantly increased compared with the previous period. The theoretical loss caused by the shutdown and maintenance of PVC in the past two weeks is 635300 tons and 67790 tons respectively, reaching a relatively high level in the year.

On the other hand, due to the influence of high temperature, loss and other reasons, some enterprises have reduced the load, and the operating load rate of some enterprises has decreased greatly, and even some production enterprises have temporarily stopped.

Recently, most of the orders of PVC products enterprises are still in poor condition, product orders have not improved significantly, and the enthusiasm for purchasing raw materials is not high. Most of the products enterprises continue to take advantage of the low price and just need to replenish, and they have a low acceptance of high prices. In some cases, there is no chasing up sentiment when the PVC price rises. In the past two weeks, the volume of transactions in the mainstream markets of PVC has been relatively low. Most of the transactions in the market are the circulation of goods between traders. The actual demand in the downstream is still weak. It can be seen from Fig. 4 that although the social inventory of PVC has shown a small trend of destocking recently, the absolute value of social inventory remains at a significantly high level.

In addition to the fact that the absolute value of social inventory remains at a relatively high level, the inventory in the plant area of PVC production enterprises has continued to increase recently, with a relatively large increase. Compared with the same period in 2021, it also shows a significantly higher situation. Recently, although the overall change of pre-sale orders of enterprises is not large, some production enterprises have delayed the delivery of customers' orders, and the inventory of some enterprises has increased significantly.

On the whole, although the social inventory has shown a slight downward trend recently, the decline is obviously less than that of the accumulated inventory in the factory area of the production enterprise. Therefore, the spot supply in the market is still relatively loose.

Although there has been a significant reduction in supply recently, it is expected that the situation of supply exceeding demand in the short term will hardly be reversed from the perspective of subsequent supply and demand expectations.

It is expected that PVC supply will exceed demand in August

In terms of supply, the maintenance of short-term PVC production enterprises is still relatively concentrated, and the loss of PVC single products of some enterprises is obvious. The load reduction due to special reasons in some regions may continue. It is expected that the short-term PVC supply will remain at a relatively low level, but the pressure on inventory and sales faced by some enterprises will continue.

In terms of demand, although the proposal of "guaranteed delivery" policy will play a certain supporting role in the completion of real estate, the high temperature situation in East and South China still exists at present, and it still needs a certain process to feed back the impact of policy factors to the actual PVC demand. At present, the long-term orders of PVC products enterprises are still small, and it is difficult to significantly increase the operating load in the short term due to special reasons. Although August is close to the traditional seasonal peak season, it is expected that the actual demand will remain at a low level. In addition to domestic demand, with the successive delivery of export orders in the early stage, the export volume of domestic PVC powder is expected to drop significantly from July compared with that in the early stage. After August, the export arbitrage window of PVC powder is closed and few new export orders are added. It is expected that the export volume of PVC powder in August will drop to the low level since 2022. Compared with July, the overall demand is expected to be difficult to increase, or even decline to a certain extent.

To sum up, it is expected that the overall supply of PVC market will continue to exceed demand in August, and the supply and demand fundamentals will remain relatively weak.