Market expectations are bearish; actual PVC trading volume has declined significantly

Thread Content

Market expectations are bearish; actual PVC transaction volumes have declined significantly. July 31, 2015, China Chemical Products Network. I. Market overview for this week: PVC prices have remained weak this week. Affected by the slowdown in the macroeconomy and the strong US dollar, the price of ethylene raw material has dropped sharply. It is expected that lower ethylene prices will impact those determined by the calcium carbide method. Downstream buyers are cautious, traders are purchasing less, and a climate of caution prevails in the industry, leading to a steady decline in transaction prices. Although PVC manufacturers still have cost support at present, a decline in the ex-plant price of PVC is inevitable in the long term. During the week, the ex-plant price of the calcium carbide method at the upstream level remained steady at 5,100 yuan per ton, but there is still room for further declines in the future. Quotations for the main domestic PVC market, unit: yuan/ton. Product, Model, East China, Price Change, South China, Price Change, North China, Price Change: Calcium carbide material, SG-5, 5300–5400, 0, 5380–5500, -20, 5280–5320, 0; Ethylene-based material, 1000, 5800–5900, 0, 5780–5800, -20, 5530–5700, -50. II. Manufacturer updates: The price of calcium carbide continues to rise; supply is limited in North China and East China, while there is not much supply in regions such as Shandong, Hebei, and Henan. Strong demand from PVC manufacturers further drives up the price of calcium carbide, and markets expect further increases in its price in the near future. Current market price for calcium carbide at the factory: The prevailing purchase price for high-quality products in Shandong is 2740–2870 yuan per ton ； In the Tianjin area, Dagu Hua at 295 L/KG costs 2,710 yuan per ton ； The purchase price for Sanyou in Tangshan, Hebei is 2740 yuan per ton at 300 L/KG, while for Shenghua in Hebei it is 2590 yuan per ton at 290 L/KG ； Henan Yuhang’s price is 2,690 yuan per ton for a delivery rate of 290 L/KG, while Lianchuang’s price is 2,200 yuan per ton for pickup in person. The prices of PVC producers using the calcium carbide method in China remained relatively stable during the week. Thanks to cost support, although low prices for PVC were observed in the downstream market, the costs at the upstream level remained strong. The increase in the price of calcium carbide also helped to offset some of the effects of falling crude oil prices. Companies in the northwest region are closely monitoring market changes, and they do not rule out taking maintenance actions as a response to falling prices. Type 5 ordinary calcium carbide material: the mainstream ex-factory price in the areas surrounding Inner Mongolia is 5,100–5,200 yuan per ton ； The mainstream acceptance price in Shandong region is 5,400–5,500 yuan per ton at the factory exit ； The mainstream ex-factory price in Hebei region is 5,280–5,450 yuan per ton upon acceptance ； In the Shanxi region, the mainstream ex-factory price is 5,300–5,400 yuan per ton, payable upon acceptance. III. Upstream Raw Materials: Data from the U.S. Commodity Futures Trading Commission (CFTC) shows that over the 7 days ending on July 21, net long positions in benchmark West Texas Intermediate crude oil dropped by 28%. Long positions hit a two-year low, while short positions surged by 25% during the same period. Crude oil prices in the New York market have fallen by more than 20% from their June highs, meeting the general definition of a bear market. U.S. crude oil production remains near 40-year highs, while oil production in the largest OPEC members has reached record levels, resulting in an oversupply in the market. In fact, the drop in oil prices is just part of a general decline in commodity prices. Commodity prices dropped to their lowest levels in 13 years as the market feared that a slowdown in China’s economic growth and a strong dollar would dampen demand. Javadi, general manager of Iran’s **Oil Company, said on Wednesday (July 29) that Iran’s current crude oil production is less than 4 million barrels per day. But once the international sanctions are lifted, Iran aims to raise its crude oil production to 4 million barrels per day within 6 months, with a target of 5 million barrels per day by 2021. In a report, credit rating agency Moody’s stated that if Iran’s crude oil production increases by 1 million barrels per day, it will inevitably drive down international oil prices within one to two years. This will further harm the interests of oil-producing countries with poor reputations and weaker economies, such as Russia, Venezuela, Nigeria, Bahrain, and Oman. On the other hand, the increased production of Iranian crude oil will also threaten small U.S. crude oil producers, potentially leading to their acquisition by larger producers ； And once prices fall below $50 per barrel, even larger producers will be at risk. IV. Statistics on maintenance activities of domestic enterprises: Manufacturing companies, production capacity, and shutdown status. Baotou Sea Level: 40 tons; shutdown for maintenance on February 5, resumption of operations around July 20. Siping Haohua: 28 tons; temporary shutdown on April 10. Shandong Hengtong: 10 tons; shutdown for maintenance starting from April 25, with resumption planned for early August. Gansu Yinguang: 12 tons; shutdown for maintenance on July 5, resumption planned by the end of the month. Enterprises scheduled for maintenance in the future: Inner Mongolia Junzheng: 64 tons; maintenance of the 320,000-ton facility in the new plant area planned for late August to early September. Yili Chemical: 50 tons; shutdown for one week starting from August 9. Yinglite: 25 tons; maintenance of the 100,000-ton Type 5 facility planned for late August to early September. Taishan Salt Chemical: 10 tons; maintenance for half a month in August. Shandong Xinfafa: 60 tons; planned for rotating maintenance in mid-August. V. Market outlook: This week, low prices have been common in the domestic PVC market. Prices in South China have remained stable but are declining, approaching the factory outlet prices. Profit margins for downstream traders have shrunk, and market confidence is very low. Affected by the domestic economic situation, prices of consumer goods are falling rapidly, and PVC is not exempt from this trend. The strong US dollar also has a negative impact on crude oil prices. Although the ex-plant price of PVC has stabilized due to the rebound in calcium carbide prices upstream, it is under continuous pressure from ethylene, so prices are likely to decline in the short term. Downstream, buyers have limited capacity to meet their demand and therefore do not stock up large quantities. Traders also adjust their strategies according to market conditions by adopting fixed-price approaches. The market is expected to move downward in a volatile manner, with a difficult rebound in the short term.