H2 May PVC Supply Supposed to Further Tighten
Preface
In May, PVC production, sales and production profit softened than before. Some companies had smooth presales before, but now their inventory accumulates amid slack sales. The futures and spot prices of PVC went lower last week, and the PVC output loss caused by maintenance was expected to further increase. Then the industry will change in the later period.
1. Intensive maintenance in May to drag down operating rates
May China PVC Unit Maintenance Plans
Remarks: SD* = shutdown, RS* = restart, OR* = operating rate
As seen from the above table, there are a lot of units undergoing maintenance. Most of the maintenance is arranged in mid-May and late May. At present, workers and unit parts are in place mostly, and maintenance time is decided. According to SCI, the PVC output loss due to maintenance is predicted to be around 201.4kt in May, up 9.67% M-O-M.
As of end-May, operating rates of PVC units are predicted to further decline with plentiful maintenance. In the week ended May 26, the weekly operating rate was estimated to be around 75.64%, down 5.65% W-O-W.
2. PVC producers faced slack sales in H1 May.
In May, PVC fundamentals were soft because of tepid demand, despite concentrated maintenance. PVC producers were confronted with slack sales, and some of them had relatively high inventories. In May, PVC producers had slim net presales, and their inventories were pushed higher.
3. Calcium carbide-based PVC production profits decreased in May as PVC EXW prices declined, while feedstock prices rallied.
The futures prices and spot prices of PVC lost ground in May. In early May, there was not much maintenance of PVC units, so the demand volume of calcium carbide was high. Calcium carbide supply tightened a little. Besides, prices of calcium carbide feedstock, namely semi-coke, mounted up from last month, reflecting the increasing production cost of calcium carbide-based PVC. However, PVC prices declined, so PVC producers faced shrinking profits in May.
4. It is predicted that PVC presales will increase, and its inventory will decline. Producers’ profits may rebound.
Recently, Formosa Plastics Company has cut back offers for June PVC shiploads. Downstream enterprises operate units at low capacity and present lackluster demand for PVC. Therefore, PVC futures and spot prices decline notably. The dominant futures settlement price has refreshed a low since March on May 20, and spot prices follow the downtrend. Participants hold a wait-and-see stance at present. But after the PVC price goes down, the downstream demand may be brightened. SCI reckons that PVC producers will enjoy increasing orders. Besides, maintenance is supposed to increase, so PVC producer inventory is likely to drop.
With more maintenance at PVC producers, the demand for calcium carbide will decrease. Calcium carbide supply will turn slightly ample from tight. Calcium carbide prices are supposed to trend downwards, indicating that the cost from producing PVC will be dented. Calcium carbide-based PVC production profits are projected to improve.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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