Dec Supply-Demand Pressure in China PVC Industry to Increase
Preface: China’s PVC powder fundamentals improved slightly amid the social inventory decline caused by output reduction in November. However, supply-demand imbalance may intensify in December.
China’s PVC powder industry fundamentals improved slightly in November caused by the notable drop in supply. PVC powder industry operating rate declined to 69.21% in November, reaching the annual low point. Meanwhile, PVC demand was largely stable. End users still purchased on a need-to basis, and some of them stockpiled with low prices. PVC producer inventory piled up, while PVC social inventory in East China moved down notably due to fewer arrivals. The drop in social inventory in East China and South China overpassed marginally the increment in PVC producer inventory, so fundamentals improved marginally, which gave support to PVC prices rebounding in November.
PVC powder fundamentals can hardly improve further in December because of expectations for rising supply and bearish attitudes to demand improvement. Thus, SCI reckons that supply-demand pressure will intensify.
PVC industry operating rate may inch up in December due to restart of maintenance units.
PVC powder industry operating rate declined to annual low level in November. First, there were more maintenance units. Second, more producers curtailed operating rates or halted production amid profit losses. In addition, special factors in China exerted impacts on enterprises’ production. Units at Inner Mongolia Zhonggu Mining Industry, Wanhua Chemical Group, Shaanxi Beiyuan Chemical Industry Group, Ningxia Yinglite Chemical Industry, Tosoh Chemical Industries, Shandong Xinfa Chemical, Suzhou Huasu Plastics, Shandong Lutai Holding Group, etc. restarted after overhauls in November. At present, only Hanwha Chemical and Salt Lake Haina Chemical plans to overhaul units in December. SCI reckons that PVC industry operating rate may rise to 71.8% in December, up 2.59% M-O-M. New 400kt/a units at Shandong Xinfa Chemical, Cangzhou Julong Chemical, and Guangxi Huayi Energy Chemical may come on stream in December.
China’s PVC powder net exports may decline in December.
PVC powder export volume saw an M-O-M decrease amid closed China export arbitrage window in H2, 2022. PVC import volume remained low. PVC import trade is mainly processed with imported materials. Net exports declined constantly. However, export deliveries in December will be boosted by increased exports at Qingdao Haiwan Chemical and Tianjin Bohai Chemical Industry at the end of November. Meanwhile, it is expected that exports from November to December will move up M-O-M due to the increment in general export orders. SCI reckons that imports via general trade mode from November to December will be 40kt-50kt, which will possibly raise PVC imports temporarily. The increase in imports may overpass that in exports, so net export volume will possibly decline in December.
PVC powder demand can hardly improve in December
According to the rule of previous years, PVC demand in southern China stayed largely stable or higher than the annual average level in December, while that in northern China turned weak in December. However, PVC demand can hardly improve in December 2022. First, orders and product enterprises operating rate underperformed. Second, producers may shut units in advance than previous year because the Spring Festival holiday is earlier than usual this year.
On the while, China PVC supply-demand pressure may strengthen in December because supply may increase slightly while demand can hardly improve. Net exports may decline further.
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