PVC fundamentals perform well
November 24, 2020
Since October, the supply of ethylene enterprises in East China is tight, and many of them are closed. PVC regional delivery is uneven, social inventory is low, and merchants have strong willingness to stand up for price. The lower reaches are relatively resistant to the current high prices, and the large-scale product enterprises can start operations, while some small and medium-sized enterprises have weak profits and low enthusiasm to start work.
Social inventory falls
According to statistics, as of last week, the average weekly operating rate of PVC production enterprises was 76.69%, with a month on month increase of 4.67 percentage points and a year-on-year increase of 1.56 percentage points. Among them, the operating rate of calcium carbide method enterprises was 80.12%, with a month on month increase of 7.20 percentage points and a year-on-year increase of 4.03 percentage points; the operating rate of ethylene method enterprises was 60.70%, with a month on month decrease of 7.17 percentage points and a year-on-year decrease of 9.96%. As of the end of last week, domestic PVC social inventory decreased by 16.12% on a month on month basis, a year-on-year decrease of 0.07%. From a regional perspective, the inventory in East China was 131000 tons, a decrease of 16.03% on a month on month basis; the inventory in South China was 18900 tons, a decrease of 16.74% month on month. Most of the new quotations of upstream production enterprises continue to push up. Although the operating rate has increased recently, there are more goods to be delivered, and the enterprises have no sales pressure. Good market demand can be seen from the data of PVC enterprises. At present, the market structure of PVC is similar to that of PP, both of which are to go to the warehouse at the spot end to support the price, but it is expected that there will be pressure to put in incremental devices.
Downstream rigid demand stability
With the rising prices of raw materials PVC and related additives, some downstream products enterprises are suffering more losses, and the terminal resistance is heating up, and the contradictions begin to appear. However, tight supply situation is expected to continue for a period of time, PVC spot is difficult to fall in the short term. In addition, due to the shortage of containers, Tianjin Port has not yet returned to normal, and the actual amount of export orders in the early stage is not large. This week, East China inventory continued to digest substantially, domestic demand performance exceeded expectations.
After the rise of external quotation, the price difference between China and foreign countries expanded, the arbitrage window of PVC export opened, and the export volume increased. Since August, some PVC plants in foreign countries have been shut down for maintenance. In addition, India's demand has recovered, and PVC goods in foreign markets are tight and prices are rising, which is bound to stimulate domestic export enthusiasm.
Strategy analysis
PVC basic performance is good, tight supply of goods, downstream just need to stabilize, social inventory down. From the technical point of view, PVC prices are currently in the rising channel and are expected to continue to rise in the future.
