PVC is uncertain in the fourth quarter

With the recent downward pressure on the macro economy and the continuous fall of international crude oil, PVC hit a new low since its listing. The author believes that the outlook for PVC is not materially positive, and the trend in the fourth quarter is not optimistic.

Capacity is still under pressure

Up to now, the production capacity of this year's paste resin project has been fully put into production, with a total capacity of approximately 9 million tons. According to the production plan, there will still be 900,000 tons of new production capacity for PVC in the fourth quarter.

Operating rate, the overall operating rate of PVC enterprises this year slightly higher than the same period last year. According to statistics, the average operating rate of PVC enterprises in the third quarter was 61.17%, a slight increase of 1.11% from last year. In fact, this year the overall situation of PVC production enterprises in our country is better than last year, especially the northwestern enterprises, in addition to routine normal maintenance, the device starts well, the overall operating rate is maintained at 70% or more, and some enterprises can maintain the operating rate At the 80%-90% level.

Real estate industry will be depressed for a long time

Affected by the continuous downturn in the property market, the third quarter PVC downstream product companies started less than expected, even lower than the same period in previous years. Most of the large-scale PVC product companies start to work at about 70%, and only 80% of them are able to reach the company. Some small PVC product companies have stopped production or changed their business because of tight funding and lack of orders. It is understood that the operating rate of large-scale enterprises is stable at 70% to 75%, and the operating rate of small and medium-sized enterprises is at 30% to 50%. Some of the poorer small enterprises are in parking or low-load operation. As a result, downstream start-ups and insufficient orders resulted in the production companies not actively purchasing PVC raw materials, which was insufficient to support the increase in PVC prices.

At the same time, at the end of September, the central bank and the China Banking Regulatory Commission issued relevant policies to support the development of the real estate market, aiming at stabilizing economic growth. Although the real estate support policy is relatively strong, the market is difficult to achieve prosperity in the past. At the same time, the policy orientation of the future will not be a single stimulus, but will only provide support for the reform. Therefore, this stimulus policy may lead to a phased improvement in real estate sales, but at least smooth the downward cycle of the real estate market.

From the historical point of view, in 2006 and 2008, when the government's real estate control policies appeared to be loosened, the real estate market rebounded significantly, and both sales areas and prices both rose. However, unlike in the past, real estate prosperity is hard to come by after the real estate control policies are relaxed. Therefore, the recent news of loosening home purchase policies may well support PVC in the short term, but it is difficult to reverse the down cycle of real estate in the long term.

The weak demand in the fourth quarter is difficult to change

The recent news that home purchase policies have been loosened may create a good support for PVC in the short-term, but the fourth quarter is the traditional off-season consumption of PVC. Therefore, weak demand is hard to change. On the supply side, if PVC production companies are put into production on schedule, domestic supply pressure will increase. The current PVC production companies are more active in pre-sale October sources, so in October there is limited room for PVC price downside, and downstream companies mainly digest inventory.

However, as the weather gradually turns cold, the demand in the north cools, and the southward shift of supply leads to increased sales pressure in East China and South China markets. PVC is also difficult to find good support, and the downward pressure from November to December increases. As a whole, the market lacks substantial interest, and the PVC trend in the fourth quarter is not optimistic.