At present, both the PVC itself and the upstream calcium carbide are in relatively tight supply. Looking forward to 2022 and 2023, due to the PVC industry’s own high energy consumption properties and chlorine treatment problems, it is expected that not many installations will be put into production. The PVC industry may enter a strong cycle as long as 3-4 years.
The calcium carbide market continues to improve
Calcium carbide is a high-energy-consuming industry, and the specifications of calcium carbide furnaces are generally 12500KVA, 27500KVA, 30000KVA, and 40000KVA. Calcium carbide furnaces below 30000KVA are state-restricted enterprises. The latest policy issued by Inner Mongolia is: submerged arc furnaces below 30000KVA, in principle, all exit before the end of 2022; qualified ones can implement capacity reduction replacement at 1.25:1. According to the author’s statistics, the national calcium carbide industry has a production capacity of 2.985 million tons below 30,000 KVA, accounting for 8.64%. Furnaces below 30,000KVA in Inner Mongolia involve a production capacity of 800,000 tons, accounting for 6.75% of the total production capacity in Inner Mongolia.
At present, the profit of calcium carbide has risen to historical highs, and the supply of calcium carbide is in short supply. The operating rate of calcium carbide furnaces should have remained high, but due to policy impacts, the operating rate has not risen but declined. The downstream PVC industry also has a high operating rate due to its lucrative profits, and there is a strong demand for calcium carbide. Looking ahead, the plan to start production of calcium carbide may be postponed due to “carbon neutrality”. It is relatively certain that Shuangxin’s 525,000-ton plant is expected to be put into operation in the second half of this year. The author believes that there will be more replacements of PVC production capacity in the future and will not bring about new supply increments. It is expected that the calcium carbide industry will be in a business cycle in the next few years, and PVC prices will remain high.
Global new supply of PVC is low
PVC is a high-energy-consuming industry, and it is divided into coastal ethylene process equipment and inland calcium carbide process equipment in China. The peak of PVC production was in 2013-2014, and the growth rate of production capacity was relatively high, leading to overcapacity in 2014-2015, industry losses, and the overall operating rate dropped to 60%. At present, PVC production capacity has moved from a surplus cycle to a business cycle, and the upstream operating rate is near 90% of the historical high.
It is estimated that fewer domestic PVC production will be put into production in 2021, and the annual supply growth rate will be only about 5%, and it is difficult to alleviate the tight supply. Due to the stagnant demand during the Spring Festival, PVC is currently accumulating seasonally, and the inventory level is at a neutral level year-on-year. It is expected that after demand resumes to destock in the first half of the year, PVC inventory will remain low for a long time in the second half of the year.
From 2021, Inner Mongolia will no longer approve new capacity projects such as coke (blue charcoal), calcium carbide, and polyvinyl chloride (PVC). If construction is really necessary, production capacity and energy consumption reduction replacements must be implemented in the region. It is expected that no new calcium carbide method PVC production capacity will be put into production except for the planned production capacity.
On the other hand, the growth rate of overseas PVC production capacity has declined since 2015, with an average growth rate of less than 2%. In 2020, the external disk will enter a tight supply balance situation. Superimposed on the impact of the US hurricane in the fourth quarter of 2020 and the cold wave in January 2021, overseas PVC prices have risen to historical highs. Compared with overseas PVC prices, domestic PVC is relatively underestimated, with an export profit of 1,500 yuan/ton. Domestic companies began to receive a large number of export orders from November 2020, and PVC has changed from a variety that needs to be imported to a net export variety. It is expected that there will be orders for export in the first quarter of 2021, which has exacerbated the tight domestic PVC supply situation.
In this case, the price of PVC is easy to rise but hard to fall. The main contradiction at the moment is the contradiction between high-priced PVC and downstream profits. Downstream products generally have a slower price increase. If high-priced PVC cannot be smoothly transmitted to the downstream, it will inevitably affect downstream start-ups and orders. If downstream products can raise prices normally, PVC prices may continue to rise.
Post time: Jun-02-2021