[Introduction] Recently, due to the impact of the Red Sea situation, multiple shipping companies have suspended navigation in the Red Sea area, forcing most shipping companies to detour around the Cape of Good Hope. This leads to longer delivery times for goods and drives up international shipping costs. The spread of the Red Sea situation has had a significant impact on global commodities, but for PVC Resin, the impact is relatively small.
The recent Red Sea situation is still spreading, which has had a significant impact on global commodities, especially with the significant increase in international crude oil prices. However, for PVC powder, the impact is relatively limited. The main impact comes from psychological factors, transmitted through futures trading to spot markets, and also from the impact of export restrictions in some regions.
The Red Sea situation spreads, chemical futures rise, Pvc Resin follows suit
The Red Sea is surrounded by a large number of refineries in Saudi Arabia, and oil transportation channels such as Iraq, a Middle Eastern country, and Qatar along the Persian Gulf coast need to pass through the Red Sea and Suez Canal to reach the Mediterranean coast and Europe. Therefore, shipping safety in the region is particularly important. So with the spread of the Red Sea situation, international oil prices have continued to rise, with Brent crude oil rising by around 9% in the past week.
As the leader of chemical products, the rapid fluctuation of crude oil prices has a particularly significant impact on chemical products. Recently, chemical products similar to crude oil in China have also seen an increase, especially in the past three days, the chemical index has achieved three consecutive positive trends, with an increase of about 3%. The collective rise in chemicals has also driven the Wenhua Index to achieve three consecutive positive results.
PVC Resin is divided into two types according to the process: calcium carbide method PVC and ethylene method PVC. Among them, the raw material source of ethylene method PVC resin is related to crude oil. Due to the relatively small proportion of ethylene method PVC powder in China, the production capacity of ethylene method PVC powder in 2023 is about 25%, so the correlation with crude oil is relatively small. However, as the same futures product, there is still a certain relationship between emotional transmission. With the continuous rise of chemical products and the Wenhua Index, PVC futures have broken through the pressure level, There has also been a follow up trend.
The Red Sea situation is spreading, and PVC resin exports to North Africa, the Middle East, and Europe are hindered
In recent years, the export volume of PVC powder from China has continued to grow, especially in 2021-2023, where the export volume achieved a qualitative leap and the export dependence has been increasing year by year. It is expected that the export dependence will reach about 10% by 2023, making exports an important factor in alleviating domestic sales pressure.
The export direction of PVC resin from China is mainly in India, Southeast Asia, Central Asia and other regions, but the flow to North Africa, the Middle East, and Europe also accounts for about 10% of the total export volume. According to customs data, the main trading partners in North Africa, the Middle East, and Europe exported 198500 tons from January to November 2023, accounting for 9.45% of the total exports during the same period.
With the fermentation of the Red Sea incident, shipping costs to Europe have skyrocketed, and China's exports of PVC powder to North Africa, the Middle East, and Europe have been hindered. However, in recent times, China's export orders have not been smooth, and the proportion of affected flows is relatively small. The obstruction of PVC resin exports has limited impact on the Chinese PVC market.
From this, it can be seen that the impact of the Red Sea incident on the PVC resin powder market is mainly reflected in the transmission of futures. Therefore, in recent times, the price of PVC resin powder has fluctuated and risen, and there has been a slight increase in spot market prices. The resistance of the small magnitude is mainly due to the still significant fundamental pressure.
In the short term, the transportation capacity problem in the Red Sea region has begun to form spillover effects. At the market news level, freight forwarding companies have issued notices to suspend bookings, and the consolidation European line index is still rising. In the future, the domestic futures market will still be supported to some extent, and the transmission of PVC resin powder from this aspect will continue. However, returning to the fundamentals of PVC powder, as the spring festival approaches, there will be greater pressure on PVC resin inventory accumulation in the future. Therefore, the rebound of PVC prices will continue to be subject to significant resistance from the fundamentals, and we are alert to the possibility of any possible pullback.
