PVC prices experienced a rapid decline and rebounded after oversold

Introduction

Recently, the PVC market has performed poorly. After a smooth decline in prices, PVC has rebounded since mid July. However, the improvement of supply and demand fundamentals is expected to be small in the future, and there is still some pressure on the macro side. We need to pay attention to the possibility of PVC falling after rising.

Recently, the domestic PVC market performed poorly and the market atmosphere was depressed. The PVC market experienced a rapid decline from June to July, and then oversold and rebounded in mid July. Take the price of SG-5 in East China as an example. On June 8, the PVC price was at a phased high of 8828 yuan / ton, and then the price fell all the way. By July 15, the price of SG-5 in East China fell as low as 6182 yuan / ton, down 2646 yuan / ton or 29.97% from the high on June 8. Subsequently, the market oversold and rebounded. As of July 21, the average price of SG-5 in East China reached 6360 yuan / ton.

The main reasons affecting the market trend are poor domestic demand, weak exports and the aggressive interest rate hike of the Federal Reserve. However, with the absolute price falling to a record low and the cost support further strengthened, the market rebounded after July 15.

The off-season is lighter, and the social inventory increases against the season

In June, the PVC market did not appear the phenomenon of demand replenishment expected by the market, but showed a lighter off-season situation. In July, there was no sign of improvement in demand, continuing the characteristics of the off-season. According to statistics, the demand for PVC in June was 1.5323 million tons, a year-on-year decrease of 19.17%. The demand in July is expected to be 1.7588 million tons, a year-on-year decrease of 7.5%, and the decline narrowed.

Due to poor demand, the social inventory of sample warehouses in eastern and southern China increased against the seasonal trend from June to July. As can be seen from Figure 3, the social inventory increased against the trend from June to July. As of July 15, the social inventory in eastern and southern China was 362400 tons, a year-on-year increase of 157.94%.

Domestic and foreign prices fell synchronously, and exports became weaker after receiving orders

Since April, domestic and foreign prices have fallen simultaneously, and there is little difference in terms of the decline. The domestic East China SG-5 fell from 9417 yuan / ton to 6360 yuan / ton, a decrease of 32.5%. The price of Formosa Plastics in Taiwan fell from US $1350 / ton FOB Taiwan to US $880 / ton, a decrease of 34.8%. Domestic PVC exports also had great advantages from the beginning of April to June to July, and the export advantage basically disappeared, and the number of export orders also decreased significantly.

Low absolute prices attract speculation and just need replenishment

With the rapid decline of prices, the losses of PVC industry intensified, and the losses of PVC outsourcing calcium carbide enterprises reached about 1200 yuan / ton by the middle of July. As the absolute price fell to 6200-6300 yuan / ton, attracting some speculative demand and just needed replenishment, after July 15, the domestic oversold rebound occurred, the number of orders received by enterprises increased significantly, and the volume of pre-sale data increased. According to statistics, as of July 21, the net pre-sale of sample enterprises reached 349400 tons, an increase of 11.74% month on month.

The improvement of fundamentals is expected to be small, and macro pressure still exists

Recently, with the slight improvement of fundamental data, PVC prices have rebounded. However, with the completion of centralized maintenance and the small reduction of production, it is expected that the supply side operating load will remain at a high level in the future, while the overall performance of the real estate market is still weak, the macro data has not improved yet, and the improvement of PVC rigid demand is also limited in the micro perspective. Therefore, it is expected that the supply and demand side will still be difficult to improve significantly in the short term.

Inflation pressure in the United States is still high, and the Fed's interest rate hike in the later period will still be the main logic affecting the commodity market. Moreover, the space for further domestic easing policy is also shrinking in the second half of the year, and the macro economy as a whole still has some pressure on the commodity market.

So at present, the PVC price trend is more inclined to oversold and rebound, and the improvement of fundamentals is not expected to be large. There is still great pressure on the macro, so we need to pay attention to the possibility of falling again after rising in the later period.