Events of PVC resin industry in 2021

2021 is destined to be a year recorded in history. The PVC resin market has ups and downs, the price has reached a record high, and there are too many hot spots in the industry. The low load at the supply end, the sharp rise in cost and the obvious large export volume jointly contribute to the market.

2021 came to an end. During this year, the PVC resin industry walked out of new brilliance, broke the market cognition in the second half of the year, and set a new record in mid October. The breaking of the historical record, on the one hand, benefited from the relatively healthy fundamentals of PVC resin, on the other hand, the market embarked on the process of history. Driven by the collective rise of black series, the PVC resin market rose irrationally.

Combing the overall performance of the market this year, we find that there are six outstanding aspects, which are analyzed in detail below.

The annual average price rose sharply, and the price hit a record high in mid October

In 2021, the overall PVC resin market was at a high level, which was obviously out of the fluctuation range of the past five years. The annual average price of SG-5 in East China was 9188 yuan / ton, an increase of 2547 yuan / ton or 38.35% over 2020. In mid October, the price of SG-5 in East China rose to 14493 yuan / ton, setting a record.

On the one hand, the sharp rise in the average price this year is due to the relative health of the fundamentals. Since 2016, the supply and demand of PVC resin has got rid of the label of overcapacity, and the industry has ushered in a prosperous situation of both supply and demand. The market has also experienced a new business cycle. In 2021, the release of new capacity is limited, the supply side is limited, and the strong demand toughness has become an important support for the fundamentals, In addition, the continuous loose monetary policy of the Federal Reserve in the first half of the year was also an important factor to promote the continuous rise of the market. In the third quarter, supported by the continuous rise of the black system, the price of PVC resin also showed an irrational rise. The speculation factors began to subside in late October, the rising momentum of PVC resin Market stalled, and the price experienced a wave of rapid decline.

U.S. plants suffered from force majeure, and domestic PVC resin exports increased significantly

The export of PVC resin in 2021 is undoubtedly a bright spot. According to the customs data, the export volume of PVC resin from January to November was 1.56 million tons, a year-on-year increase of 183.4%. Export factors also contributed significantly to the rise of the market.

The significant volume of domestic PVC resin exports this year is mainly affected by the continuous force majeure of American PVC resin plants. In mid February, the United States suffered a rare cold wave, and more than half of American PVC resin plants stopped production for a long time, resulting in a shortage of international supply. At the end of August, the United States suffered another hurricane, and some PVC resin plants once again declared force majeure. Affected by this, the international market price continued to rise.

The export of PVC resin flooring products keeps increasing

According to the data of China Customs, the export volume of PVC resin flooring products in China from January to November 2021 was 5.1847 million tons, an increase of 17.11% year-on-year. The export volume in the first 11 months exceeded the total of 2020.

With the development of the fashion trend of decoration in Europe and America, the demand for PVC resin flooring and other flooring products in Europe and America has increased steadily. However, the scale advantage of China's PVC resin flooring products industry is obvious, and a large number of PVC resin flooring products are exported to Europe and America. With the development of market demand, the export volume of China's PVC resin flooring products has increased significantly in recent years.

The start-up of raw calcium carbide decreased and the cost of PVC resin increased sharply

In 2021, the impact of raw calcium carbide on PVC resin was significantly enlarged, and the average price of calcium carbide increased rapidly. In 2021, the average price of calcium carbide delivered to Shandong was 5199 yuan / ton, an increase of 1983 yuan / ton or 61.66% compared with the average price in 2020.

The rapid rise in the price of calcium carbide is mainly due to the background of the double carbon policy. As a high energy consuming industry, the industry as a whole has been greatly restricted. On the one hand, the increment of calcium carbide has been limited in recent years. The main calcium carbide producing areas have raised the approval threshold of new calcium carbide indicators, so that calcium carbide has gradually entered a tight balance in recent years. In 2021, the operating load rate of stored calcium carbide also decreased significantly, resulting in an abnormal shortage of calcium carbide in local time, affecting the operating load rate of the downstream.

Industrial chain profits transferred upstream

Comparing the average annual profits of calcium carbide and purchased calcium carbide PVC resin single products in Inner Mongolia, it can be seen that the overall profit level of calcium carbide in 2017-2020 is not high and hovers at the edge of profit and loss for most of the time. The profit of calcium carbide single products in 2021 is significantly higher than that in 2020, with an increase of 564.56%, far exceeding the level of previous years; In contrast, the profitability of PVC resin increased year by year from 2017 to 2020, and decreased by 25.04% in 2021 compared with 2020. The profits of the industrial chain have obviously shifted to the upstream.

As the supply of calcium carbide is in a relatively tight state most of the time in 2021, the operating load of calcium carbide enterprises is low for some time due to various reasons, the supply of calcium carbide is in short supply, the price is significantly higher than that in previous years, and the price of PVC resin also rises significantly at the same time. However, in terms of the increase, the increase of PVC resin price is significantly lower than that of calcium carbide, so the profits of the industrial chain are transferred to the upstream.

The social inventory of PVC resin has remained low for a long time

In the first three quarters, the social inventory of PVC resin has been at a low level, with a year-on-year decrease of 30% - 50% in most times. In the fourth quarter, the social inventory was gradually slightly higher than that in the same period of previous years.

The main reason for the long-term low inventory absolute value lies in the supply and demand of PVC resin. In terms of supply, the new capacity of PVC resin in 2021 is limited, and the operation of some new units has been delayed, with a net increase of 470000 tons (excluding the replacement of 800000 tons of capacity in Dagu).

Since mid July 2021, the operating load of some PVC resin manufacturers has decreased due to various reasons, and some PVC resin plants have been temporarily shut down. Some have not been recovered so far. The overall PVC resin capacity is not fully released, and the output has increased compared with 2020, but the increment is limited. In terms of demand, the domestic demand is general, but the export volume of PVC resin increases greatly, which is another main reason for the obvious low inventory.

Looking forward to 2022, the expected increment of PVC supply side is small, the cost side will have some support, the expectation of demand side is poor, there is also great macro uncertainty, and the market will still have great challenges and opportunities.