On the supply side, according to Zhuo Chuang Information, as of May, nearly half of the production capacity has been overhauled this year. However, judging from the current published maintenance capacity, the number of companies that announced the maintenance plan in June is relatively small. The overall inspection volume in June is expected to be less than that in May. However, due to the fact that there are still more production capacity in main production areas such as Inner Mongolia and Xinjiang that have not been overhauled, it is necessary to continue to pay attention to the development of equipment maintenance. In terms of overseas installations, for the US installations that were overhauled after the cold wave in March, the market generally expects that they will be overhauled and run at higher loads by the end of June. It is necessary to continue to pay attention to whether there are unexpected factors. In terms of demand, the current PVC downstream has a relatively strong toughness under the condition of poor profitability. The downstream start of pipes is basically maintained at about 80%, and the start of the profile varies, with 2-7 becoming the main one. And according to our understanding, the replacement of PVC by PE is not achievable in a short period of time, and it is expected that short-term demand resilience is still sufficient. But we need to pay attention to whether the weather in South China and East China in June will affect downstream real estate demand. The supply and demand side in June is expected to be weaker than that in May, but the overall contradiction between supply and demand is not big
In terms of costs, June is the last month of the second quarter. Energy consumption policies in some regions may be appropriately tightened at the end of the quarter. Currently, Inner Mongolia maintains an irregular power restriction policy, and Ningxia regional policies have attracted attention. It is expected that calcium carbide will maintain a high price of 4000-5000 yuan/ton in June. PVC cost end support is still there.
In terms of inventory, the current PVC inventory is in a state of continuous destocking, and downstream companies have very little inventory. Enterprises just need to purchase under high prices, and the inventory is far below the level of previous years. Low inventory and continued destocking show that PVC fundamentals are relatively healthy. The market currently pays more attention to PVC inventory. If there is an accumulation of inventory, it is expected to greatly affect the market mentality. The overall inventory of PVC in June may rise, but it is expected that it may still be lower than the level of previous years.
On the whole, the supply and demand side may be weaker than in May, but the contradiction is not big, the cost side is still supported, the inventory is extremely low and the continuous destocking supports the price of PVC. In June, the game between supply and demand and cost, PVC may fluctuate widely.
Operation strategy:
Wide fluctuations are expected in June. At the top, pay attention to 9200-9300 yuan/ton, and at the bottom pay attention to the support of 8500-8600 yuan/ton. The current basis is relatively strong, and some downstream companies may consider buying a small amount of hedging operations on dips.
Uncertainty risks: the impact of local environmental protection and energy consumption policies on calcium carbide prices; the recovery of external disk devices is weaker than market expectations; real estate demand weakens due to weather; crude oil prices fluctuate sharply; macro risks, etc.
Market review
As of May 28, the main PVC contract closed at 8,600 yuan/ton, a -2.93% change from April 30. The highest price was 9345 yuan/ton and the lowest price was 8540 yuan/ton.
Figure 1: The trend of PVC main contracts
In early May, the main contract of PVC fluctuated upward, and the overall center of gravity moved upward. In the middle and late ten days, under the influence of policy and macro sentiment, the bulk commodities fell in response. PVC had three consecutive long shadow lines, and the main contract once dropped from 9,200 yuan/ton to the 8,400-8500 yuan/ton range. During the downward adjustment of the futures market in the middle and late days, due to the overall tight supply of the spot market, the inventory continued to drop to a low level, and the adjustment range was limited. As a result, the East China spot-main contract basis has risen sharply to 500-600 yuan/ton.
Second, price influencing factors
1. Upstream raw materials
As of May 27, the price of calcium carbide in Northwest China was 4675 yuan/ton, a 3.89% change from April 30, the highest price was 4800 yuan/ton, and the lowest price was 4500 yuan/ton; the price of calcium carbide in East China was 5,025 yuan/ton, compared with April Change of 3.08% on the 30th, the highest price is 5300 yuan/ton, the lowest price is 4875 yuan/ton; the price of calcium carbide in South China is 5175 yuan/ton, a change of 4.55% from April 30, the highest price is 5400 yuan/ton, and the lowest price is 4950 yuan/ Ton.
In May, the price of calcium carbide was generally stable. At the end of the month, with the decrease in PVC purchases, the price went down for two consecutive days. The price in East China and South China is 4800-4900 yuan/ton. The fall in calcium carbide prices weakened the cost-end support at the end of the month. In May, Inner Mongolia maintained the state of irregular power cuts, and the state of Ningxia was concerned.
As of May 27, the CFR Northeast Asia ethylene price was US$1,026/ton, a change of -7.23% from April 30. The highest price was US$1,151/ton and the lowest price was US$1,026/ton. Regarding the price of ethylene, the price of ethylene was mainly down in May.
As of May 28, the second metallurgical coke in Inner Mongolia was 2605 yuan/ton, a change of 27.07% from April 30. The highest price was 2605 yuan/ton and the lowest price was 2050 yuan/ton.
From a current point of view, the production capacity announced in June for overhaul is less, and the demand for calcium carbide is expected to increase. And June is the last month of the second quarter, and it is expected that the dual energy consumption control policy in some regions may be tightened. In Inner Mongolia, there is a high probability that the current state of irregular power restrictions will continue. The dual control policy will affect the supply of calcium carbide and further affect the cost of PVC, which is an uncertain factor in June.
2. Upstream starts
As of May 28, according to wind data, the overall operating rate of PVC upstream was 70%, a change of -17.5 percentage points from April 30. As of May 14, the operating rate of calcium carbide method was 82.07%, a change of -0.34 percentage points from May 10.
In May, the production enterprises started the spring maintenance, and it is expected that the overall maintenance loss in May will exceed April. The downturn on the supply side makes the overall supply of the market tight. In June, the maintenance plan for equipment with a total production capacity of 1.45 million tons was announced. According to statistics from Zhuo Chuang Information, since this year, nearly half of the production capacity has been overhauled. Xinjiang, Inner Mongolia, and Shandong regions have relatively large unmaintained production capacity. At present, from the published data, only a small number of companies have announced maintenance. The maintenance volume in June is expected to be less than that in May. Follow-up needs to pay close attention to the maintenance situation.
In addition to the domestic maintenance situation, the market currently generally expects the recovery time of the US equipment to be at the end of June, and part of the expected impact of the market on overseas supply and the Indian region has been reflected in the June quotation of Formosa Plastics.
On the whole, the supply in June may be higher than that in May.
3. Downstream start
As of May 28, according to wind data, the downstream operating rate of PVC in East China was 69%, a change of -4% from April 30; the operating rate of South China’s downstream was 74%, a change of 0 percentage points from April 30; the downstream of North China The operating rate was 63%, a change of -6 percentage points from April 30.
In terms of downstream start-ups, although the profit of the pipe with the largest proportion is relatively poor, it has been maintained at about 80%; in terms of profiles, the start-up is generally about 60-70%. The downstream profit is relatively poor this year. There were plans to increase it in the early stage, but it was also given up due to poor terminal acceptance. However, the downstream has shown strong resilience to construction this year.
At present, downstream companies are less adaptable to the large fluctuations in PVC prices. However, downstream demand is more resilient. And according to our understanding, the cycle of downstream substitution of PVC and PE is generally longer, and the short-term demand is expected to be acceptable. In June, some regions may affect downstream orders due to weather, but the possibility of a substantial stall is low.
4. Inventory
As of May 28, according to wind data, PVC social inventory was 461,800 tons, a change of -0.08% from April 30; upstream inventory was 27,000 tons, a change of -0.18% from April 30.
According to the data of Longzhong and Zhuochuang, the inventory has continued to be greatly depleted. It is also understood that because the price of PVC in the downstream has continued to be high in the early stage, and the spot has shown stronger resilience than the futures, the overall downstream inventory is very low, and it is generally just needed to get the goods. , Some downstream said that the price is 8500-8600 yuan / ton when the willingness to replenish goods is strong, and the high price is mainly based on the rigid demand.
The current inventory is a signal that the market is more concerned about. The market generally believes that the continued depletion of inventory indicates that the downstream rigid demand is acceptable and the price still has a certain degree of support. If there is an inflection point in inventory, it will have a greater impact on market expectations, and continuous attention is needed.
5. Spread analysis
East China spot price-main futures contract spread: April 30 to May 28, the basis change range is 80 yuan/ton to 630 yuan/ton, the basis change range of the previous week is 0 yuan/ton to 285 yuan/ton .
Affected by the overall downward trend in the futures market in mid-to-late May, the basis was strong, indicating that the overall spot market was indeed tight and the price decline was limited.
09-01 Contract Price Difference: From April 30th to May 28th, the price difference ranged from 240 yuan/ton to 400 yuan/ton, and the price difference range from 280 yuan/ton to 355 yuan/ton in the previous week.
Outlook
Wide fluctuations are expected in June. At the top, pay attention to 9200-9300 yuan/ton, and at the bottom pay attention to the support of 8500-8600 yuan/ton. The current basis is relatively strong, and some downstream companies may consider buying a small amount of hedging operations on dips.
Post time: Jul-14-2021