At present, power rationing in Northwest China affects the supply of calcium carbide, and cost support makes the short-term price of PVC fluctuate at a high level. Looking forward to the future, early maintenance PVC production enterprises have resumed production, the downstream demand performance is poor, PVC supply and demand pattern changes, and the probability of later decline is large.

Cost support still exists

At present, due to the shortage of power supply, under the influence of the policy of "double control of energy consumption", the main calcium carbide producing areas in Inner Mongolia and Ningxia have strictly restricted the industrial power consumption, especially the high energy consumption industrial power consumption, which makes the calcium carbide production enterprises in Northwest China face the problem of irregular production restriction, so the problem of tight calcium carbide supply is difficult to change, However, with the increase of downstream PVC starting load, the market demand for calcium carbide will increase. At the same time, under the effect of supply and demand mismatch, calcium carbide will continue to be difficult to destock. Therefore, calcium carbide price pattern will not change, cost side support for PVC prices will continue.

At the same time, the world's major economies gradually get rid of the impact of the epidemic, the economy shows a sustained recovery trend, and the demand for crude oil in the later market will continue to increase. In addition, although Iran's nuclear negotiations are progressing smoothly and Iran's crude oil will flow back into the market in the later stage, the tight global crude oil supply pattern will not change under the effect of OPEC + strict production reduction, and there is still room for crude oil prices to rise. Affected by this, the cost of ethylene process PVC will remain high.

Supply has increased

In May, affected by the shortage of calcium carbide supply, poor production and operation, domestic PVC production enterprises had a relatively concentrated shutdown and maintenance, resulting in a phased decline in PVC supply and rising PVC price. In June, the prices of upstream raw materials calcium carbide and vinyl chloride fell, the profits of domestic PVC production enterprises with calcium carbide method and ethylene method increased, and the production enthusiasm of enterprises increased. As of June 4, the gross profit of calcium carbide method in East China was 1834 yuan / ton, a month on month increase of 650 yuan / ton; The profit of ethylene process is 500 yuan / ton, which is increased by 200 yuan / ton on a month on month basis. The profit of production enterprises has been restored.

Affected by the improvement of the operation of PVC production enterprises, the domestic PVC production enterprises with preliminary maintenance will resume production in late May. However, in June, domestic PVC manufacturers with maintenance plans included 400000 ton plant in Ordos, 400000 ton plant in Shihua, Dezhou, and 300000 ton plant in Hengtong, Shandong. However, the maintenance involves less production capacity and shorter maintenance period. In June, domestic PVC supply will increase.

In addition, the overall domestic PVC inventory is at a low level, the pressure of production enterprises to remove inventory is small, and the inventory of downstream enterprises is low. The inventory is mainly concentrated in the hands of traders, and the overall impact of inventory on PVC price is more neutral.

Demand hardly improves

Affected by the high temperature, PVC downstream demand entered the off-season, downstream enterprises have varying degrees of decline. According to the data released at present, the starting load of domestic profile enterprises is between 50% and 70%, which is about 10% lower than that of the previous period. Affected by the off-season, the orders of downstream enterprises are limited at present, most of which are just needed orders. If the terminal orders are not followed up in the near future, the downstream enterprises may have a further decline.

In addition to the weak seasonal consumption, unexpected factors also affected the production of PVC pipe and profile enterprises in South China. On the one hand novel coronavirus pneumonia epidemic was found in Guangzhou, and the mobility of people in these areas was restricted, which had an impact on local enterprises' production. On the other hand, due to the restrictions on industrial power consumption in South China, the production of some downstream enterprises has been affected to a certain extent. On the whole, the demand for PVC is not good due to many factors. The high price of PVC makes it difficult for the downstream to conduct downward, which leads to the downward expectation of PVC price.

Based on the above analysis, with the improvement of production and operation conditions, the starting load of domestic PVC production enterprises is rising, and the supply is increasing. At the same time, downstream consumption is affected by seasonal off-season, power rationing and epidemic situation. Under the above effects, domestic PVC supply and demand pattern will change from tight balance to slight surplus, and PVC price is expected to fall.

In the short term, affected by power rationing, calcium carbide production enterprises are greatly restricted, and it is difficult to break through the bottleneck of calcium carbide supply. In addition, the international crude oil price trend is strong, and the cost side provides strong support for PVC price. Under the background of strong reality and weak expectation, PVC will still show a high oscillation trend in the short term, and hold a cautious bearish view on PVC in the medium and long term（ Zhongyuan futures)