Aug PVC Powder Industry Likely to Meet Supply Glut
In July, PVC supply mounted up as maintenance of PVC units decreased from June. Calcium carbide prices declined at first but then mounted up in the month, and PVC powder producers faced losses in profits. SCI predicts PVC supply will further increase with less maintenance, but demand will hardly improve noticeably amid the end of demand slack season. Local producers will face pressure both from costs and sales.
Jul PVC Powder Output Climbed with Less Maintenance
The output loss caused by the units’ downtime (including long-term shutdown) was 207.26kt in July, down 52.01kt M-O-M but up 12.23kt Y-O-Y. Besides three companies that remained in long-term shutdown, there were 22 companies experiencing maintenance or temporary shutdown in the month.
The overall operating rate at PVC powder companies was 78.48% in July, up 1.52% M-O-M. China’s PVC powder output was 1,910.107kt in July, up 5.37% M-O-M and up 2% Y-O-Y because of decreasing maintenance. PVC powder output totaled 13,209.226kt between January and July 2022, which dropped by 1.52% from the same period of last year.
Jul PVC Powder Producers Faced Limited Presales and High Inventories
The average operating rate at profile product enterprises was 27% in July, down 1% M-O-M amid insufficient orders. The real estate industry underperformed, leaving limited orders for profile product enterprises. Profile product enterprises were inactive in production, and several curtailed operating rates marginally. Operating rates were kept at 40%-50% at large-scale enterprises, while those at medium and small-scale enterprises were low.
In July, PVC powder social inventory accumulated slightly. Traders and downstream converters were prudent to building the inventory when PVC powder prices plummeted in H1 July. After PVC powder prices rebounded in H2 July, downstream buying appetites didn’t show a remarkable improvement, and export orders further decreased. Thus, PVC powder supply became ample. Net presales at PVC powder producers stood at a relatively low level in July. Generally, PVC powder producers still encounter slack sales.
High Costs Caused Negative Profits
In July, calcium carbide mainstream prices decreased at first but then rallied. Its EXW prices remained in a downtrend but rebounded at the end of this month, and the overall fluctuation range was narrow. Prices of calcium carbide decreased, subdued by falling PVC prices and soft demand. At the end of this month, calcium carbide market prices rallied from lows because of declines in operating rates at calcium carbide companies and rebound in operating rates at PVC companies. PVC companies that outsourced calcium carbide faced severer profit losses. As of July 29, profit losses reached RMB 930/mt in Shandong. Comparatively, PVC companies in Inner Mongolia enjoyed an advantage in costs, but they were also confronted with negative profits.
Aug PVC Powder Output Estimated to Grow
The PVC powder output loss caused by maintenance is projected to decline to around 150kt in August given limited maintenance plans. SCI predicts that PVC powder output will reach around 1,950kt, and operating rates will rise to 80% or so in August.
There will be decreasing maintenance at PVC companies, reflecting stable demand for calcium carbide. The average price of calcium carbide is supposed to inch up in August backed by tight supply. Offers will probably be enhanced to stimulate the resumption of calcium carbide production. However, coal and semi-coke prices are predicted to fall, cutting the cost support to calcium carbide prices. If calcium carbide companies earn profits, they may enhance operating rates. Most of the PVC producers will probably face cost pressure if PVC EXW prices don’t rise remarkably.
Supply and demand fundamentals are the major factors influencing PVC prices in August. PVC producers are predicted to experience profit losses, but high feedstock costs will underpin PVC prices notably from the cost side. SCI estimates that PVC powder supply will increase in August, and demand will improve a little, but fundamentals will not change noticeably. It will be hard to change the supply glut of PVC powder in the short run. In addition, there will still be uncertainties in the macroeconomic environment, which may be affected by the conduction of relevant strategies. All in all, there will be no remarkable momentum to push up PVC powder prices. PVC powder prices are projected to be range-bound in August. With calcium carbide prices going up, PVC powder producers will still face cost pressure in August. Some producers are likely to meet high sales pressure as downstream converters and traders may keep wary about stockpiling and export demand is predicted to weaken.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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