Background: According to Chinese customs statistics, from January to July this year, China's cumulative export of PVC pure powder reached 1.2722 million tons, a year-on-year decrease of 11.53%. Currently, exports are still profitable, but domestic supply pressure is high. Despite the high costs of calcium carbide and ethylene, domestic and foreign trade prices are still facing upward pressure.
The current high volatility of crude oil prices, the tight supply of domestic calcium carbide, and the continuous rise in prices have supported the high cost of PVC Resin. However, foreign markets are constrained by the prolonged off-season demand, and demand will cool down in the short term after the end of the off-season export stocking.
1、 Domestic market prices fluctuate and the price difference between internal and external markets shrinks
The overseas PVC powder market has not been able to continue its upward trend due to the current off-season demand. Despite the high rise in crude oil prices, the domestic Pvc Resin market demand is difficult to conceal its weakness. The downstream PVC Resin product enterprises started production from July to August, which fell to below 45%, second only to the low level during the Spring Festival.
In terms of the Indian market, with the entry of Chinese resources, its domestic supply is expected to be sufficient, while the downstream is still in the off-season, especially when the monsoon season ends later. Domestic merchants' willingness to continue purchasing has decreased, the supply-demand contradiction has begun to highlight, and the market's high position has begun to weaken. At the end of August, the price intention decreased by 10-20 US dollars per ton, and the domestic PVC resin price in India decreased by 2-3 rupees month on month, ranging from 76 to 78 rupees per kilogram. Considering the current demand situation, the Asian PVC powder market quotation in October is expected to have some room for price reduction.
2、 PVC resin export profit squeezed
As of August 25, 2023, the export profit of PVC powder in China has decreased to around 10-20 US dollars per ton. Due to the high prices in the domestic market and the early pre-sale preference of enterprises, the new pre-sale supply is insufficient, and the export quotation of enterprises remains firm. However, there are currently no obvious demand highlights in overseas markets such as India. Market prices in India, Southeast Asia, and other regions are under pressure, and prices in some regions are low. Short term export profits are under pressure.
3、 The future of exports is full of challenges
Although there is still room for arbitrage in exports and the urgent need to alleviate domestic supply pressure, which has prompted domestic producers to actively export, there are both opportunities and challenges for exports. Firstly, the exchange rate fluctuates frequently, especially the depreciation of the RMB, which is theoretically beneficial for exports, but also increases the market's wait-and-see sentiment. Secondly, currently, Southeast Asia is facing traceability issues with products such as flooring from the United States, resulting in damage to the Southeast Asian product processing and processing industry, and a slowdown in demand for flooring products. The largest export destination country, India, has recently submitted two documents to the Technical Barriers to Trade Committee by its Ministry of Chemicals and Petrochemicals, requiring the Bureau of Indian Standards (BIS) to propose quality requirements for imports of polyvinyl chloride (PVC) and Polypropylene (PP) that comply with World Trade Organization (WTO) guidelines. The market expects that once the policy is implemented in the long term, it will be bearish for PVC resin exports, but this year's exports are temporarily safe. India wants to implement BIS certification and is expected to have a buffer period of at least six months.
In summary, although exports are currently maintaining profitability, domestic product supply pressure is still too high, and there is significant uncertainty in the foreign market in the future. In October, there may be room for market decline, and external prices may shrink. Especially in the fourth quarter, facing the peak period of global PVC powder production and supply, as well as the pressure brought by economic recovery in major product processing regions such as China and Southeast Asia, export challenges still exist.
