PVC Companies Under Favorable Profit, Despite Mixed Prices
Preface: China’s PVC prices rose at first but then declined in April. Calcium carbide prices lost ground, and profits from calcium carbide-based PVC production improved correspondingly. VCM prices remained high, while ethylene prices edged down, so the profits from ethylene-based PVC showed large differences.
China’s PVC market prices trend sideways at highs in April. Prices of PVC feedstock were different, leading to various profits from producing PVC via different technologies. Outsourced VCM-based PVC companies experienced profit losses, while ethylene-based and calcium carbide-based PVC companies enjoyed relatively high profits. Details were as follows:
1. Outsourced calcium carbide-based PVC companies encountered slightly increasing profits.
PVC prices lingered around highs in April. The futures prices underperformed, and demand was weaker than expected, but PVC producers’ sales pressure didn’t increase a lot. Thus, PVC prices were pressured to decline narrowly, and the overall price hovered at a high level. As for its feedstock, calcium carbide prices dropped below cost value as its supply was ample, which brought decreasing feedstock cost for PVC producers. As a result, outsourced calcium carbide-based PVC companies witnessed an improvement in production profits.
According to SCI, in Shandong, profits of outsourced calcium carbide-based PVC companies have gradually increased since mid-March and achieved the one-month highest level on April 14, which were also near the yearly highs.
In the later period, the cost pressure of PVC companies that purchased calcium carbide from the market is expected to change little. The supply of calcium carbide is relatively stable, but supported by feedstock cost, calcium carbide prices will probably not drop notably. Besides, PVC prices are expected to remain largely stable, so profits of outsourced calcium carbide-based PVC companies are supposed to perform favorably.
2. Self-supplied calcium carbide-based PVC production profits declined narrowly.
In April, the profit of PVC companies with self-provided calcium carbide still maintained a high level, but it was lower than that at the end of March. On the one hand, the price of semi-coke rose slightly, enhancing the cost from producing calcium carbide. Taking the self-provided calcium carbide companies in Inner Mongolia as an example, it can be seen from the below chart that the profit on April 14 was about RMB 1,118/mt, down RMB 128/mt from the end of March.
The capacity of PVC companies that self-produced calcium carbide accounts for above 50% of China’s total PVC capacity. In the short term, prices of semi-coke are mostly stalemated, and calcium carbide prices are expected to change little. Participants hold a cautiously optimistic attitude towards the PVC price trend. It is predicted that Inner Mongolia integrated companies will face immobile profits in the short run.
3. Imported VCM-based PVC production profits stayed negative.
In April, arrivals of imported VCM remained stable, while ethylene-based PVC prices moved sideways mostly and inched down partly, so profits from imported VCM-based PVC production were negative. Taking imported VCM-based PVC in East China as an example, the production profit was RMB -475/mt on April 14, which remained largely flat from end-March.
In the next two weeks, VCM import prices are expected to stay high, exerting heavy cost pressure on imported VCM-based PVC producers. But PVC prices are likely to be mixed. Therefore, imported VCM-based PVC production will probably continue to face losses in profits.
4. Outsourced ethylene-based PVC companies had favorable production profits.
In April, ethylene prices continued to slightly trend downwards, with a cumulative decline of RMB 500/mt compared with the end of last month. Meanwhile, mainstream prices of ethylene-based PVC headed down slightly, and the decline in PVC price was smaller than the decline in ethylene price. The above chart shows that ethylene-based PVC production profit was about RMB 2,599/mt on April 14. That indicates that ethylene-based PVC companies occupy the largest profit advantage among all types of PVC producers.
All in all, the overall profit of PVC powder industry was bettered gradually, as PVC prices were mixed, while calcium carbide and ethylene prices dropped. However, outsourced VCM-based PVC companies faced negative profits as VCM prices remained high. SCI reckons that calcium carbide-based PVC and outsourced ethylene-based PVC companies will have passable profits in the short run, but VCM-based PVC companies will be still confronted with profit losses.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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