PVC Inventory Piled Up amid Muted Demand and Stagnant Delivery
China’s PVC powder output grew by 3.14% M-O-M in October, which mainly resulted from one more working day of production compared with September, even though operating rates decreased by 0.71%. The output loss caused by maintenance plunged, but some producers reduced operating rates after pondering their profits losses. PVC powder output totaled 18,553.86kt between January and October 2022, which rose by 0.09% from the same period of last year.
In November, some chlor-alkali enterprises are at the edge of loss or have faced negative profits due to the serious profit loss at PVC enterprises. In the future, it is likely that chlor-alkali enterprises will reduce their operating rates. It is expected that China’s domestic PVC output will remain at a low level in November, but the demand will hardly brighten. The fundamentals may still be in a weak state. The cost pressure on PVC enterprises may continue, but sales pressure may gradually weaken.
Oct 2022 PVC Output Loss Caused by Maintenance Plunged, but Operating Rates Declined.
October was usually a month with sparse maintenance in the past few years, and the situation continued in October 2022. The phenomenon that units underwent maintenance and accidental shutdown remained largely steady in October, but the offline capacity declined, and maintenance time was shortened. Therefore, the affected output due to the units’ shutdown decreased notably. The output loss caused by the units’ downtime decreased significantly in October and stood at a medium level during the year.
PVC industry operating rate declined because of negative profits and short supply of feedstock. Calcium carbide-based PVC prices continued to decrease, aggravating the profit losses of PVC producers. Some chlor-alkali producers faced notable decreases in profits, so they curtailed operating rates to cut profit losses. Besides, the delivery at chlor-alkali producers was delayed amid blocked logistics, which led to certain inventory accumulation. At the same time, a lot of PVC producers confronted tight availabilities of feedstock and had to whittle down operating rates.
The output loss caused by the units’ downtime (including long-term shutdown) was expected to be 205.86kt in October, down 106.39kt or 34.07% M-O-M. The average operating rate of PVC powder units was 73.97% in October, which shed 0.71% from September. China’s PVC powder output reached 1,814.039kt in October after climbing by 3.14% M-O-M and 9.47% Y-O-Y.
PVC Producers Faced Inventory Accumulation amid Falling Presales.
Operating rates and sales at PVC downstream enterprises didn’t improve in October. The real estate market data still underperformed, and the macro environment stay soft, resulting in bearish expectations of participants. Downstream enterprises and traders showed poor interest in stockpiling. Therein, downstream users stocked up on a need-to basis, and some of them purchased forward-month cargoes.
PVC powder supply-demand fundamentals still performed poorly in October, even though the social inventory declined a lot compared with end-September. The absolute value of social inventory remained higher than that in October 2021, and the PVC inventory at local producers represented a noticeable increment from the end of September. A couple of producers have met resistance in delivery since H2 October, so arrivals of goods in consumer markets decreased a lot, leading to a decline in commercial warehouse inventory. However, goods piled up at upstream producers, which meant that PVC fundamentals failed to improve. PVC powder prices headed down constantly, and some traders and downstream enterprises showed weak initiatives in buying amid bearish stances about the short-run PVC market. As a result, presales at PVC producers dropped, which also pushed up producers’ inventory.
There will be scarce maintenance plans at PVC producers in November. But serious losses in PVC production profits will prompt PVC producers to cut production. PVC units’ operating rates will inch lower corresponding, and PVC supply is expected to decrease. As for the demand side, downstream enterprises may maintain largely steady operating rates and purchase PVC on a hand-to-mouth basis in November. But some downstream enterprises may curtail operating rates amid cold weather, causing lackluster demand. Besides, the export arbitrage window will probably keep closed. Overseas buyers are unwilling to stock up amid bearish sentiment. Thus, SCI estimates that China’s PVC export volume will keep largely flat in November.
In a word, PVC powder social inventory is supposed to remain high because of soft demand in November, despite falling supply. In terms of the macro environment, it is predicted that the Fed will raise the interest rate, which will dampen the commodity markets. Generally, China’s PVC powder prices are likely to trend downward in November 2022.
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