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Off-season approaching, carefully look at PVC rebound height(1)

Abstract: In general, the supply end of the construction is expected to increase, and the downstream demand or gradually into the seasonal off-season, PVC fundamentals continue to be weak. The recent impact of macro sentiment on commodities is more obvious, December is a period of intensive policy introduction, short-term PVC is still expected to continue in the fundamentals and macro game range, cautious to look at this round of PVC above the rebound height.

First, the supply side analysis

1. PVC start-up storage is expected to increase

PVC maintenance gradually reduced in December, the overall start expected to increase, as of December 8 week, the domestic overall start load of PVC 70.64% (-0.49%), of which calcium carbide method operating rate of 68.15% (-0.94%), ethylene method operating rate of 79.51% (+1.08%). From the overall output of this year, PVC production in November in about 1.6424 million tons, December is expected to produce in 1.76 million tons, the annual output in 21.95 million tons, last year at the same time 22.16 million tons, slightly reduced year-on-year, mainly in the second half of this year under the PVC continued weak active production reduction phenomenon more, the start of the decline compared to last year. It is about to enter the traditional peak season, the supply side is expected to increase, while the demand will weaken, and the pressure of supply and demand remains. In addition, from the perspective of new production capacity, 400,000 tons of Julong Chemical, 400,000 tons of Shandong Xinfa and 400,000 tons of Guangxi Huayi will be tested in November-December, and the expected release will be in January-February next year.

2. The warehouse inventory is high year-on-year, and the pressure on the supply side is not reduced

From the perspective of inventory, under the influence of the epidemic in Shanghai in the first half of the year, the overall demand recovery from May to July was not as expected, and the arrival of midstream warehouse increased, so the midstream inventory did not reduce as usual but remained at a high level. In August, with the increase in maintenance, the supply side decreased, and the decrease of midstream warehouse arrival made the inventory slightly reduced, but it entered the traditional peak season of “nine gold and ten silver”. In late October, due to the outbreak of the epidemic in various regions, the sealing and control became strict, and the arrival of upstream goods decreased, leading to the destocking of midstream warehouses, but it was still at the highest level in the same period in history. As of December 9, the total inventory of sample warehouses in East and South China was 245,300 tons (-2.23% compared with the previous week, The same as +80.1%), including 202,500 tons of inventory in East China (-2.22% month-on-month, +88.37% year-on-year) and 42,800 tons of inventory in South China (-2.28% month-on-month, +49.13% year-on-year). We need to note that the reduction of midstream inventory is only due to the impact of upstream shipments, and the overall inventory has not been transferred to the downstream. That means demand is not getting better. Subsequently, with the gradual unsealing of the epidemic, logistics and transportation are expected to improve, and the arrival of midstream goods increases. On the whole, there will still be a pattern of accumulation at the end of the year, and the continued high inventory is a manifestation of the weak fundamentals of PVC this year.


Post time: Dec-20-2022