The price of PVC hits a 10-year high, and downstream companies are miserable. Original Li Dongling China Chemical Industry News

Driven by the fundamentals of high upstream calcium carbide prices and tight supply and demand, the recent domestic polyvinyl chloride (PVC) market has shown a prosperous scene not seen in 10 years. On September 10, the average price of PVC in the market was 9825 yuan (ton price, the same below), a record high in 10 years, an increase of 113.94% from the lowest point in 2015.

Industry insiders generally believe that due to factors such as rising prices of raw material calcium carbide and the advent of the downstream consumption season, PVC prices are likely to rise but never fall in the short term, but they are worrying in the long run.

The current price reaches the ten thousand yuan line

"For the PVC industry, 2021 is destined to be an extraordinary year. In previous years, the price of PVC fluctuated between 6000 and 7000 yuan, but this year it has basically remained above 8500 yuan. Recently, it has set new highs repeatedly. The price of vinyl PVC has stabilized. Standing firmly on the ten thousand yuan line, the price of calcium carbide PVC also has a trend of breaking through ten thousand yuan." Jin Lianchuang analyst Liu Tianyang said.

Since September 7th, PVC futures contracts have set new highs in succession, and the recent contract price has stood above the 10,000 yuan line for 4 consecutive days. On September 10, the closing prices of PVC contracts 2109, 2110, 2111, and 2112 all exceeded the 10,000 yuan mark, of which contract 2109 closed at a high price of 10,450 yuan.

The spot market is not far behind. According to data from the Business Society, in the second week of September, the focus of the quotations of mainstream PVC manufacturers moved up again, with a daily increase of 50 to 200 yuan. Last Wednesday, as futures surpassed 10,000 yuan, the spot market surged sharply. Spot prices in East China and South China also exceeded 10,000 yuan, and some companies even closed down the offer and waited for the price to be sold.

In fact, since the second half of the year, the PVC market has entered a state of rapid growth. According to data from Longzhong Information, taking East China as an example, the average price of SG-5 PVC in East China from January to June this year was 8,585 yuan, an increase of 40.28% over the same period last year. After that, the price continued to fluctuate upward. On September 8, the average spot price was 9,915 yuan, a record high, an increase of 50.68% over the same period last year.

Calcium carbide pushes up to form support

Regarding the reasons for this round of PVC prices to record highs, Western Securities analyst Yang Hui believes that the high price of calcium carbide provides strong cost support for maintaining stability.

At present, about 80% of my country's PVC production capacity is calcium carbide method. "The high energy consumption and high emission characteristics of calcium carbide make it a key rectification target under my country's dual-carbon goal." A large amount of carbon dioxide is emitted. Under the background of the "carbon peak and carbon neutral" policy, many places strictly control the newly added capacity projects of calcium carbide. Take Inner Mongolia as an example. The policy clearly stipulates that projects such as calcium carbide and PVC will no longer be approved from 2021, and production capacity and energy consumption reduction replacements must be implemented in the region if construction is really necessary.

In the past five years, my country's calcium carbide production capacity has continued to withdraw, and the effective production capacity has dropped from 44.29 million tons in 2016 to 33.48 million tons in 2021. In terms of inventory, affected by the properties of dangerous chemicals of calcium carbide and the short shelf life, and the high demand for downstream PVC and 1,4-butanediol, the current inventory of calcium carbide industry is only 0.02 million tons, which is an absolute low level, and the relationship between supply and demand is relatively tight.

In this context, the domestic calcium carbide price has risen rapidly since the second half of 2020, and has now exceeded 5,000 yuan, an increase of 38.3% from the beginning of the year and an increase of 86.4% year-on-year, giving strong support to the PVC market from the cost side.

Tight supply and demand fueled the flames

In addition to the cost support of calcium carbide, tight supply and demand and higher external markets have also helped PVC prices reach new highs.

On the supply side, since the second half of the year, the PVC market has generally maintained a tight supply and demand pattern, and the upper and middle reaches of the industry chain inventory has been at a historically low level over the same period. Especially after July, under the dual constraints of tight raw material supply and rising costs, the operating rate of the PVC industry has dropped significantly, and it is still at the low level of the same period in recent years. According to Liu Tianyang, in early September, some domestic PVC production enterprises were under-started, and individual enterprises were overhauled. The overall operating rate dropped to about 78.04%.

In terms of demand, the operating rate of domestic PVC downstream enterprises has rebounded from the previous month, and it is also higher than the same period last year. Data show that as of September 3, the operating rate of downstream products companies in North and South China increased by 5% compared with August. The tight balance between supply and demand has contributed to the PVC market.

In addition, the performance of PVC outer disks was firm. According to Zhang Jun, a polyolefin researcher at China University of Materials, the current supply of PVC in India is tight, and demand in Southeast Asia has begun to improve, driving up external prices. CFR China prices remain at $1380, CFR Southeast Asia prices are at $1390, and CFR India offers $1,640. The strong external market has boosted the domestic PVC market.

Short-term strong and long-term worrying

For the PVC market outlook, Li Yanjie, chief analyst of China Securities Futures Energy and Chemical, is more optimistic. According to his analysis, the demand side is about to enter the peak consumption season of "Golden Nine and Silver Ten". According to the resilience in the first half of the year, it is expected that the probability of a sharp stall in the PVC market is unlikely. In terms of exports, in the short term, some devices in the United States will be suspended due to the hurricane, which has caused prices in some parts of Asia to rise. The long-term trend also needs to pay attention to the recovery of external disk demand.

But the industry also has concerns about the PVC market outlook. "The PVC market is going up, and the downstream is facing a loss, and the resistance has also increased. Spot transactions have become stalemate, which has dragged down the basis." Zhang Jun believes that as the price of PVC continues to rise, some rigid demand will be squeezed out. , The risk of midstream accumulation of stocks is increasing, and the disk may face the risk of rising and falling.

Li Min, an analyst at Zhuo Chuang Information, believes that the current profits of the PVC industry chain are concentrated in the upstream, and the calcium carbide industry almost encompasses all the profits of the industry chain. As for PVC manufacturers, the profits of integrated enterprises due to their own calcium carbide are still normal, but some of the enterprises that purchase calcium carbide have been losing money, and the downstream PVC products enterprises are showing a loss.

According to research conducted by Jinlianchuang, the current price of PVC is still too high. Some downstream companies also said that, given the peculiarities of the PVC market this year, they will not stock up even if the peak season comes, and they will basically buy as they use them.

To sum up, in the short term, the price of calcium carbide fluctuates at a high level, and the supporting force is still strong. In addition, the autumn maintenance starts and the supply continues to be tight. It is expected that the PVC market will operate strongly in the short term. However, in the long run, as downstream companies lose more money and resistance affects demand, it is necessary to guard against PVC prices falling from a high level.