Aug Brimming PVC Availability amid Subdued Demand, Despite Output Declines
Preface: PVC industry operating rates declined to a relatively level because of intensive maintenance and operating rate cuts at a few producers. PVC supply declined accordingly. But its availabilities were relatively ample as downstream demand stayed soft, which exerted high sales and inventory pressure on PVC producers. Besides, China’s PVC exports were expected to decrease. In conclusion, SCI predicts that the PVC supply glut will continue in August.
Relatively Low Operating Rate in PVC Industry
Operating rates at PVC companies have declined recently, and PVC supply has dropped.
Some large-scale companies underwent intensive maintenance, which made PVC output loss rise a lot. The PVC powder output losses caused by maintenance or shutdown of units were 63.53kt and 67.79kt respectively in the latest two weeks, touching high levels within this year.
A few companies curtailed operating rates given high temperature, profit loss, or other reasons. Several companies even stopped production temporarily.
Demand Didn’t Improve Notably, Pushing Up PVC Powder Inventories.
PVC downstream enterprises mostly witnessed lackluster deals, so they showed poor interest in buying. They represented a limited acceptance of high-priced PVC powder, and their stockpiles were mainly on a need-to basis. When PVC powder prices went up, they didn’t raise stockpiles. In recent two weeks, deals stayed insipid in mainstream markets, and resources mostly flowed among traders amid sluggish downstream demand. As seen from the above chart, PVC social inventory still stood at a high level, despite that it showed a slight decrease.
PVC powder inventory at producers increased continuously with a wide range. Producers had stable presales, but some customers delayed the delivery, leading to a surge in PVC producer inventory.
PVC powder social inventory inched down, but producers saw severe inventory accumulation. Thus, PVC powder supply availabilities remained plentiful. SCI expects that PVC supply will remain higher than demand.
Oversupply Likely to Be Underway in August
PVC powder output is supposed to remain low because of operating rate reduction and maintenance, but insipid demand will cause heavy inventory and sales pressure on some producers. Thus, PVC supply will probably become excess.
The policy of house delivery guarantee may underpin the completion of houses in the future. But the construction will still be constrained by high temperatures in East China and South China. It is predicted that PVC downstream enterprises will not enhance operating rates significantly given scarce orders. Their consumption volume of PVC powder will also remain low, even if the traditional demand peak season approaches. In the export market, the export volume has started to drop noticeably since July as previous orders were delivered successfully. The export arbitrage window is closed in August when China’s PVC powder export volume is predicted to touch lows in the year. Overall demand for PVC powder is reckoned to decline.
As a result, SCI estimates that PVC supply will stay higher than consumption volume in August, reflecting soft fundamentals.
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