China PVC Weekly Report（September 12 to September 16, 2022）

The demand of PVC is relatively scattered, but most of it is related to real estate. Apart from the main variables like population and real estate policy, the land market is a leading indicator to observe the real estate heat. At present, real estate land sales are still stone cold.

The total real estate cycle is generally considered to have be around 60 years, and 20 years is a long-term cycle, which generally corresponds to the technological progress and population cycle, and the short-term cycle is generally 4-5 years corresponding to the financial cycle. The first bottom of China real estate market was October 2008, the second was April 2012, the third was December 2015, and the fourth were April 2020. According to this, it is estimated that the bottom of the fifth cycle will be in the second and third quarters of 2024, from this perspective, this round of real estate should be just at the center of decline and still far from the bottom.

Core view: At present, the macro risks continue, the transmission of the policy of guaranteeing the delivery of buildings is expected to take time, and the market sentiment is temporarily weak. From a fundamental point of view, PVC inventory pressure still exists, PVC may continue to fluctuate weakly in the short term.

Price: This week, the PVC spot transaction was not good, the social inventory remained high, and the Fed's aggressive interest rate hike expectations were strengthened. The futures price fell under the weakened macro atmosphere, and the spot followed. As of September 16, East China Calcium Carbide Law 918 US$/ton (-25), East China Ethylene Law 951 US$/ton (-2).

Supply side: PVC operating rate is expected to increase. Due to the relaxation of power restriction, the operating rate of PVC increased. As of September 16, the overall operating rate of PVC was 77.59% (+5.18%) , among which the operating rate of calcium carbide method is 77.99% (+3.56%), and the operating rate of ethylene method is 76.1% (+11.15%)

Demand side: The improvement in downstream demand is limited. Recently, the operating rate of PVC downstream film and granulation industries has improved slightly, but the operating rate for pipes and profiles has not changed much, and it is difficult to see a significant improvement in the operating rate of downstream products in the short term. In the medium term, we will pay attention to the improvement of downstream terminal orders with the continuous implementation of the "guaranteed handover" measures.

From January to July, the cumulative export of PVC was 1.42 million tons, a year-on-year increase of 21.9%. Due to the decrease in export orders in July, the export volume to be delivered has dropped significantly, and it is expected that the export volume in August will decrease significantly. Formosa Plastics lowered its October quotation in line with expectations. The short-term external market performance was not good, and the export window will continue to be closed in the short term.

Inventory side:This week, the domestic PVC market fluctuated and fell, the supply-side output increased, and the demand did not change much. In addition, due to the impact of futures delivery, the inventory increased. According to Zhuo Chuang statistics, as of September 16, the total inventory of sample warehouses in East China and South China was 359,800 tons (+3.21% month-on-month, +112.22% year-on-year).