As the impact of tax reduction is fully digested, PVC gradually returns to fundamentals. Although the current inventory is high, the demand is general, but considering the poor performance of the chlor-alkali plant, the willingness of the enterprise to price later will be stronger, and the author maintains a strong view on PVC.
Since the value-added tax was lowered from 16% to 13%, PVC futures needed to be repriced, resulting in a large decline. From a technical point of view, PVC futures fell below the previous support line and technically returned to the weak. However, as the market fully digested the tax reduction and the arbitrage space during the tax reform period, the spot purchase boom was stimulated, and the PVC price stopped falling and rebounded, returning to the upper support line.
Chlor-alkali enterprises can't stand PVC losses
Affected by environmental factors, the supply of upstream calcium carbide is tight, and prices continue to rise, compressing the profit margin of PVC. Up to now, the production cost of calcium carbide method in East China is 6,000 yuan / ton, the profit is around 320 yuan / ton, and the profit continues to decline. Last week, the Tianjiayi Chemical Plant in Yancheng City, Jiangsu Province exploded. Although the company mainly produces dye intermediates, the accident caused heavy casualties, which will inevitably lead to a new round of security inspections and environmental inspections, which will affect the production of calcium carbide. At the same time, the price of caustic soda has dropped significantly. As of March 27, the price of caustic soda in East China was 3,450 yuan / ton, down 750 yuan / ton from February 18, a decrease of 17.86%.
The cost of PVC in calcium carbide process has risen, profits have been gradually compressed, and the price of caustic soda with associated relationship has continued to weaken, leading to the failure of the strategy of using alkali to raise chlorine when PVC prices are low. Therefore, we believe that in this case, it is difficult for chlor-alkali enterprises to endure the price of PVC below cost, and the game of later price and supply will intensify. Judging from the current market supply situation, the operating load of PVC enterprises was 77.48%, a decrease of 3.71% compared with the same period of last year. Throughout the country, 2.61 million tons of PVC production enterprises will be overhauled in April, and the market supply will be further tightened. If the post-production profit is not good, the inspection volume will further increase.
Weak demand has constrained PVC price increases
After the Spring Festival every year, with the recovery of trade and the peak of housing renovation, PVC demand will pick up and inventory will begin to enter the down cycle. Judging from the situation in previous years, the domestic PVC social stocks will have an inflection point in March and enter the destocking cycle. As of March 22, domestic PVC social inventories reached 6.7766 million tons, up 4.37% from the previous week and up 2.93% from the same period last year. Instead of a seasonal decline, social stocks continue to increase, which will have a greater repressive effect on the price of PVC, suppressing the enthusiasm of downstream companies. At the same time, the export of PVC in January-February decreased by 23%. Due to the resumption of production of foreign equipment, the demand for domestic PVC in the market showed a downward trend.
From the demand side, the procurement boom that earned tax differentials caused by the national tax reduction in the early stage has come to an end, and the recent market enthusiasm for centralized procurement has subsided. At present, due to the upward price of PVC, the profit of downstream pipes and profiles is not good, and the procurement of enterprises is relatively cautious, and the demand is difficult to release.
Market outlook
In summary, the current decline in exports and stable demand have resulted in no seasonal decline in PVC inventories, and PVC prices remain weak. However, considering the current poor profit of chlor-alkali integrated equipment, PVC enterprises can hardly bear the loss of PVC. Therefore, under the support of cost, PVC will also show a trend of easy rise and fall, and the purchase price of downstream enterprises is difficult to decline. It is recommended to wait for a short time in operation, and you can arrange multiple orders in the medium and long term.


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