Profits from Producing PVC Powder Improve in May
Overview: In May, profit losses from producing calcium carbide-based PVC and ethylene-based PVC eased backed by a notable increase in PVC powder prices. Calcium carbide prices moved up, while ethylene prices dropped.
Profit losses from producing calcium carbide-based PVC eased gradually as the growth rate of PVC prices notably overpassed that of calcium carbide prices.
In May, the issuance of ultra-long special Treasury bonds, the reduction of provident fund loan interest rates, the cancellation of the lower limit of commercial loan interest rates, the reduction of the down payment ratio, and the government’s purchase of commercial housing on demand and other policies were implemented, which boosted the macro atmosphere and propped up real the estate-related commodity market. PVC futures prices trended up, and the arbitrage space increased, so hedgers showed higher interest in purchasing, propping up order-taking at producers. PVC producers raised EXW prices constantly amid eased sales pressure. At the end of May, the average EXW price was RMB 5,975-6,025/mt in cash in Shandong, up RMB 440-450/mt compared with early May (RMB 5,535-5,575/mt in cash).
In May, calcium carbide prices rose by RMB 100-200/mt, showing regional differences. In early May, some furnaces were shut down for maintenance. In addition, the electricity supply was unstable, so market resources were tight, driving up calcium carbide prices notably. In end-May, with the restart of furnaces and stable electricity supply, the calcium carbide supply recovered. Thus, calcium carbide EXW prices moved down.
Up to May 30, gross profits at PVC enterprises that outsource calcium carbide in Shandong was RMB -111.7/mt, up 251.3/mt from May 9.
Profit losses at PVC producers who outsourced ethylene eased notably.
In May, the self-delivery price of ethylene dropped by RMB 300/mt, dragging down the cost, while the ethylene-based PVC price rose significantly. Up to May 30, gross profits at PVC enterprises that outsource ethylene was RMB -32/mt, up RMB 531/mt.
SCI reckons that profits at PVC producers will possibly inch down in June.
In June, calcium carbide prices may first drop and then stabilize, dragging down the cost of calcium carbide-based PVC. Ethylene spot prices may first rise and then fall.
In June, the PVC market will likely face higher supply pressure. Fewer PVC units are planned to take overhauls, while orders at downstream enterprises see a downward trend. Positive real estate-related policies will possibly give support to the PVC market. In the short term, PVC powder prices will likely be range-bound, and the price of SG-5 in East China may hover at RMB 5,800-6,050/mt.
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