Will Overseas Public Health Event Hinder China PVC Export?
[Preface] At present, the situation of overseas public health events is more serious, and various countries have also adopted corresponding measures. However, due to the different medical conditions, response attitudes and methods in different countries, the development uncertainty of overseas public health events has increased. It is predicted to restrict the export of PVC downstream products.
Among PVC downstream products, flooring panels, hard pipes, profiles and PVC sheets are usually exported. But the export volume was low and reached around 4,500kt in 2019. Therein, the flooring panels export volume was 4,040kt.
It needs 1,900kt of PVC resources to produce 4,500kt of downstream products, which account for 9.35% of the total PVC consumption volume. If counting out downstream products produced from modes of processing and assembling trade provided with raw materials and processing trade with imported materials, there is less consumption of PVC. The definition of the above two modes was as follows:
1. Processing and assembling trade provided with raw materials refers to the business activities in which all or part of the raw materials, auxiliary materials, spare parts, components, accessories and packaging materials (hereinafter referred to as materials and parts)are supplied by the overseas enterprise, and the operating Chinese enterprise just carries out processing or assembling in accordance with the requirements of the overseas enterprise, and charges for the processing, with the finished products being marketed by the overseas enterprise.
2. Processing trade with imported materials refers to a business mode whereby a domestic entity with the power to engage in foreign trade uses foreign exchange to purchase imported raw materials, sources, supplementary materials, accessories, parts and components, and wrapping materials(hereinafter referred to as materials and parts ) so as to process these into finished products for re-export. Processing with imported material can be categorized into 2 types: compatible custom contract on processing with imported materials and non-compatible custom contract on processing with imported materials.
China mainly imported PVC powder via processing trade with imported materials, and the volume of PVC powder imported via this trade mode took up 86.35%, and that via general trade took up 11.36%. From April to May, China’s PVC powder prices were obviously higher than international prices, pushing up the trading volume via general trade, and imported resources arrived intensively in June and July.
In 2019, China’s PVC powder import volume was 665kt. Therein, the PVC processing volume via processing trade with imported materials and processing and assembling trade provided with raw materials was 650kt. It means that the downstream products of those 650kt of PVC powder resources will be exported. Thus, except for this sector, the exported downstream products consumed 1,250kt of PVC powder resources, which accounted for 6.1% of the total PVC powder consumption volume in China. Thus, if the export of downstream products is hindered, the domestic PVC inventory will be consumed very slowly.
Last year, when Sino-U.S. trade friction was severe, the export volume of floor was still in an uptrend. At the end of 2019, the Sino-U.S. trade friction was eased gradually, which contributed a lot to the exports of downstream products. However, the severe public health event in foreign countries impacted the foreign consumption notably. Meanwhile, the exhibition of downstream products will be postponed, so China’s export market of PVC downstream products will suffer pressure.
According to the research on a few floor producers, SCI learns that most producers ran units above 70%, and some of them ran at full loads. They continued delivering resources to buyers based on previous orders. Concerning the later orders, they are predicted to be impacted a lot. Some enterprises said that foreign customers requested suspension of shipment. SCI will continue focusing on the development and control of overseas public health event. If there are limited export orders in the future, the consumption speed of PVC in China will slow down. Thus, it needs to improve the domestic sales of downstream products, so as to mobilize the consumption of PVC.
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