Initial inflection point of PVC inventory
Combined with past experience, PVC inventory will show a gradual downward trend from April to August, and the price is expected to fluctuate upward in the process of removing the inventory in the later stage.
Recently, the fundamentals of PVC have improved, the inflection point of social inventory has initially appeared, and the price shows an oscillatory upward trend. Looking forward to the future, driven by the rising cost, improved demand and declining inventory, it is expected that there is still room for PVC prices to rise.
Strong cost side support
Domestic PVC production is mainly divided into calcium carbide PVC resin and ethylene PVC resin, of which the output of calcium carbide PVC resin accounts for a relatively high proportion. The data show that the prices of calcium carbide and ethylene have increased recently, and the production cost of calcium carbide PVC resin and ethylene PVC resin has increased significantly. As of March 17, the delivered price of calcium carbide in Northwest China was 4500 yuan / ton, that in East China was 4925 yuan / ton, and that in South China was 5050 yuan / ton. The price of calcium carbide increased by nearly 300 yuan / ton compared with the beginning of March.
As of March 17, CFR Northeast Asia ethylene price was US $1301 / ton, up 5.69% from the beginning of March and 27.42% from the beginning of the year. The rise in raw material prices has driven the upward movement of the focus of PVC price operation. According to the latest raw material price, the latest production cost of calcium carbide method is 8540 yuan / ton, the production cost of ethylene method is 9750 yuan / ton, the production profit of calcium carbide method is nearly 400 yuan / ton, and the ethylene method is in a state of low profit. From the cost side, the current PVC production profit level is in a reasonable range, and there is little downward space. The cost side has strong support for the price.
Improvement of supply-demand relationship
The recent rise in PVC prices is not only supported by the cost side, but also driven by the improvement of the relationship between supply and demand. From the supply side, the operating rate and output of PVC have increased month on month recently, and the overall operating rate has increased from 75% at the beginning of the year to 82%. The month on month increase is large, but the year-on-year increase is only 3.75 percentage points, and the overall supply pressure is not large. From the demand side, the domestic demand has improved month on month recently, and the downstream operating rate of PVC has gradually picked up after the Spring Festival. As of the week of March 17, the operating rate of profile enterprises was 50% - 70%, significantly increasing month on month. In addition to the improvement of domestic demand, the recent export performance is good. On the one hand, affected by the failure of India's anti-dumping, domestic PVC exports to the Indian market have increased recently; On the other hand, the rise of international energy costs increases the expectation of PVC price rise in the international market, and the price advantage of domestic PVC appears, driving the increase of exports. It is expected that the domestic PVC export volume in the first quarter will be higher than that in the same period last year.
Driven by the improvement of supply-demand relationship, the inflection point of PVC social inventory has initially appeared. According to statistics, as of March 13, the social inventory of PVC was 335500 tons, with a month on month decrease of 2.27% and a year-on-year decrease of 0.56%. The social inventory has decreased for two consecutive weeks and is slightly lower than the level in the same period last year. Combined with past experience, PVC inventory will show a gradual downward trend from April to August, and the price is expected to fluctuate upward in the process of removing the inventory in the later stage.
Marginal improvement of real estate industry
The downstream of PVC is mainly the profile and pipe industry, which is closely related to the prosperity of the real estate industry, especially with the completion cycle of the real estate. Since 2021, the domestic real estate industry has experienced an obvious cold winter. The GDP of the real estate industry once showed negative growth in the fourth quarter of 2021, and the performance of the real estate industry is still poor from January to February 2022. It is expected that a series of supporting policies will be implemented in China in the second quarter. As a real estate industry with a large proportion of GDP, it is expected to stabilize. The marginal improvement of the real estate industry will drive the improvement of PVC demand and the upward shift of PVC price focus.
Overall, the main positive factors for the recent rise in PVC prices are the rise in costs, the improvement in demand and the decline in inventory. The main negative factors are the increase in supply month on month. The impact of short-term positive factors is slightly stronger than negative factors. It is expected that the short-term price is strong and oscillatory. In the medium term, the steady growth policy in the later stage will continue to work, the marginal recovery probability of the real estate industry is large, the PVC demand is expected to be improved, the inventory will enter the downward cycle, and the upward probability of price oscillation is large, which is expected to break through the upper edge of the recent oscillation range. In the later stage, it is necessary to pay close attention to the demand changes in the downstream of PVC to prevent the adverse impact of the lower downstream demand on the price.
