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With the recovery of calcium carbide supply after the Spring Festival and the transformation of market supply and demand pattern, PVC may continue the trend of recent correction.
Limited cost support
At the end of each year, due to the rainy and snowy weather in Northwest China and the shortage of transportation capacity before the Spring Festival, there will be structural shortage of calcium carbide supply. This year is no exception. Due to the heavy snow in many places in the north, the road transportation is not smooth, and the delivery of calcium carbide production enterprises is not smooth. In this case, the raw material supply of PVC production enterprises with calcium carbide method is tight, and enterprises start to plunder raw materials, and the price of calcium carbide has rebounded sharply in the near future.
At present, due to the rising price of cost end, the profit of PVC by calcium carbide method and ethylene method has been compressed, and the supporting effect of cost end on PVC has begun to appear. Before February, the market capacity tension and weather factors are difficult to ease, and the strong pattern of calcium carbide price is expected to continue. However, the shortage of calcium carbide supply is only structural. At present, calcium carbide enterprises show a trend of accumulation. With the recovery of transportation capacity after the Spring Festival, this part of inventory will be put on the market, the price of calcium carbide will fall, and the supporting effect of cost on PVC will also be weakened.
Abundant market supply
As of the week of January 12, the starting load of domestic PVC production enterprises was 81.89%, down 0.98% month on month, up 0.72% year on year. Among them, the starting load of PVC production enterprises with calcium carbide method is 82.45%, down 1.09% on a month on month basis; the starting load of PVC production enterprises with ethylene method is 79.27%, up 1.69% on a month on month basis. At present, there are only a few devices in China that have been shut down for a long time due to faults, and only a few of them have been overhauled or their load has been reduced. Among them, the starting load of 400000 ton unit in Inner Mongolia Sanlian is 50%, that of 300000 ton ethylene process unit in Salt Lake magnesium industry is temporarily stopped, that of 500000 ton calcium carbide process unit is 50%, that of 120000 ton unit in Qingsong Jianhua is 70%, and that of 80000 ton unit in Chengdu Huarong is overhauled to the beginning of February. The overall starting load of domestic PVC production enterprises is on the high side, and the market supply is relatively abundant. After the Spring Festival, with the reduction of environmental protection pressure, some limited devices will resume production and increase load, and the market supply will further increase.
Weak market demand
In terms of demand, near the end of the year, downstream pipe and profile enterprises shut down in a large area. In addition, it is the low consumption season in the downstream. Downstream enterprises are pessimistic about PVC market, so the market stock strength is limited. Downstream enterprises are more focused on purchasing just needed or digesting their own inventory. Not only that, due to the limit of collection before, some downstream enterprises suspended accepting orders, and consumption further weakened.
In terms of inventory, although the inventory of PVC has increased recently, it has decreased significantly compared with the same period last year, which shows that the inventory removal of PVC in the middle of last year is relatively strong, which objectively supports the price of PVC. However, if the supply and demand of PVC is still in the current situation after the Spring Festival, then the inventory or enter the accumulation cycle, which will suppress the price of PVC.
To sum up, PVC prices rebounded to an important pressure level supported by rising costs and low inventories. But we think that the price rise of calcium carbide is caused by poor transportation. With the recovery of transportation capacity after the Spring Festival, the cost support for PVC will be weakened. At the same time, at present, the starting load of PVC enterprises is on the high level, while the downstream consumption performance is relatively weak. In this case, the overall market supply exceeds demand pattern will be formed, and PVC inventory will gradually rise. Based on the above judgment, we believe that the probability of PVC price falling in the later period is relatively large, and we can rely on the rebound high of 6645 yuan / ton for short test, and the first target is near the 60 day average.