Third, the supply side: the release of new capacity is slow, the operating rate is affected by profits
PVC new capacity release is slow. In recent years, the production speed of new PVC production capacity is lower than expected. Although there are many production plans, most of them are delayed production capacity due to the unimplemented production plan this year, and the actual production process is slow. Therefore, the output of PVC is greatly affected by the storage device. The operating rate of PVC mainly considers its own profit. Due to good profit in March, some PVC enterprises postponed maintenance to May, and the operating rate reached 81% in March, which exceeded the average level of previous years. The total output in the first five months of 2022 reached 9.687 million tons, slightly lower than the level of 9.609 million tons in the same period of last year and above the average level of previous years. In general, the price of calcium carbide at the cost end is declining rapidly, and the profit of PVC production enterprises is good most of the time. Therefore, although the level of the same period last year has declined, the rate of PVC operation this year is still at a historically high level.
Our dependence on PVC import source is not high, import market scale is difficult to open, the import scale this year is obviously lower than the level in previous years. The outer disk is mainly ethylene process, so the price is high, and the import of goods will have a limited effect on the overall domestic supply.
Iv. Demand side: Export support is strong, and “strong expectations” of domestic demand give way to “weak reality”
In 2022, domestic interest rate cuts combined with measures to stabilize growth were introduced, and strong expectations occurred several times on the demand side. Although exports grew faster than expected, domestic demand never recovered significantly, and weak reality outweighed strong expectations. The apparent consumption of PVC from January to April totaled 6,884,300 tons, down 2.91% from the same period last year, mainly due to the drag of domestic demand. The first quarter is the low season of demand, PVC consumption has obvious seasonal characteristics, showing the first fall and then rise. In the second quarter, with the temperature rising, PVC gradually entered the peak season, but the demand end performance in April was lower than market expectations. In terms of external demand, the export of PVC in the first half of the year exceeded the expected growth, and the effect of foreign trade was obvious. Exports from January to May totaled 1,018,900 tons, up 4.8 percent from the same period last year. Domestic calcium carbide process compared with overseas ethylene process has obvious price advantage, export arbitrage window open. The expiration of India’s anti-dumping policy has increased the price advantage of China’s PVC powder exports, which saw explosive growth in April, hitting a peak export volume in a single month.
With the wave of interest rate hike overseas, the growth rate of overseas economy will slow down in the second half of the year, and the lack of external demand will lead to a sharp decline in the growth rate of PVC export, but the net export volume is expected to continue to maintain. Sales of previously owned U.S. homes fell 3.4% in May to 5.41 million on an annualized basis, the lowest level since June 2020, underscoring how high prices and soaring mortgage rates are crimping demand. As the US real estate sales figures fall, the import demand for PVC flooring will weaken. PVC is widely used, downstream products are mainly divided into hard products and soft products two categories. Among them, pipe and pipe fittings are the biggest area of PVC consumption in our country, accounting for about 36% of the total consumption of PVC. Profiles, doors and Windows are the second largest consumer area, accounting for about 14% of the total consumption of PVC, mainly used for making doors and Windows and energy-saving materials. In addition, PVC is also widely used in flooring, wallboard and other boards, films, hard and other sheets, soft products and other fields. PVC pipes and profiles are mainly used in real estate and infrastructure and other fields. Consumption presents certain seasonal characteristics, with centralized stocking before and after the Spring Festival → peak consumption season in the second quarter → gold nine silver ten → light at the end of the year. PVC flooring industry has been growing rapidly since 2020, and the export scale has been increasing year by year in the past two years. From January to May, the total export of PVC flooring is 2.53 million tons, mainly exported to developed countries in Europe and America.
Real estate investment continued to weaken. Except the one-month growth rate of completion did not continue to decline, the growth rate of sales, new construction, construction and land acquisition all continued to decline and a large range, until the decline narrowed in May. Policies have begun to exert their force, including adjusting the lower limit of mortgage interest rates for first homes, lowering the five-year LPR beyond expectations, and gradually lifting restrictions on purchases and loans in some cities. These measures are intended to improve demand and stabilize expectations. In the later stage, the real estate market is expected to recover tortuous.
PVC belongs to the post-cycle commodities of real estate, and the terminal demand is linked to real estate. The demand for PVC in real estate lags behind. The apparent consumption of PVC has a high correlation with completion, slightly lagging behind the new starts. In March, the construction of downstream products factories gradually increased. Entering the second quarter is the peak season for demand, but the actual performance is lower than market expectations. Subject to the epidemic repeatedly affected the order volume, the operating rate of downstream enterprises in April and May was much lower than previous years. The release of actual demand needs time process, PVC rigid need to follow up still need to wait.
Post time: Dec-26-2022