The mainstream selling mode of PVC powder in our country is mainly distributed by “distributor/agent”. That is, large-scale PVC powder production enterprises to distribute to traders, traders then sell to downstream terminal form. This sales mode is on the one hand because of the separation of PVC powder production and marketing, production enterprises are concentrated in the northwest region, the consumption area is mainly concentrated in North China, East China and South China and other places; On the other hand, the concentration of PVC powder production end is relatively high, but the consumption end is more dispersed, and there are more small and medium-sized products enterprises in the downstream.
Traders, as the intermediate link, play the role of reservoir in the whole trade chain. According to their own financial situation and the forecast of PVC powder price, traders will adjust the inventory, choose whether to stock up on spot, in order to gain profits from the rise in the price of PVC powder in the future. And will also use futures hedging to avoid risks and lock profits, which to a large extent affects the spot price of PVC powder.
At the same time, PVC powder is a typical domestic demand driven goods. Most of China’s output is supplied to real estate and other related industries through the production of pipes, profiles, floors, boards and other products. Vinyl PVC powder mainly flows to medical packaging, infusion tubes, toys and other industries. The proportion of exports is relatively small, and the historical dependence on exports fluctuates between 2%-9%. However, in the past two years, due to the mismatch of global supply and demand and the change of the price difference between domestic and foreign, the proportion of China’s PVC powder exports has increased, becoming a strong supplement to the demand for PVC powder. In 2022, the export volume of PVC powder in China reached 1,965,700 tons, the peak in recent years, and the export dependence rate was 8.8%. However, the import volume remains low due to lack of cost advantage and arbitrage space, and the import dependence fluctuates between 1%-4% in recent years.
Real estate is an important demand area for PVC powder. About 60% of the downstream products of PVC powder are used in real estate. The newly started area of real estate can represent the demand trend of the construction industry for PVC powder in the future. In the application scenarios of PVC powder in real estate construction, drainage pipes are mainly used indoors (toilet, kitchen, air conditioning), usually in the middle and late stages of construction. The threading pipe/fitting is used as soon as it is started and continues until the top is capped. Profiles are used in the back end of real estate, mainly for plastic steel doors and Windows, and the broken bridge aluminum has obvious competition. Floor/wallboard is used in the decoration stage. At present, the floor is still mainly exported. Wallboard can replace latex paint, wallpaper and so on.
PVC powder is used in the middle and back end of real estate as a whole. The construction cycle of real estate is generally about 2 years, and the concentration period of PVC powder is generally used in one and a half years after the new construction.
Affected by the factors of declining construction area of new real estate, the demand for PVC powder for construction in 2022 will get out of the high level and show a declining trend. With the improvement of construction progress, the demand for PVC powder may improve in 2023, but from the perspective of the new construction, the improvement range of the demand for PVC powder in the future may be limited.
PVC powder has typical seasonal characteristics. Because its downstream is mainly the construction industry, it is affected significantly by the seasons and climate. Generally speaking, PVC powder is the weakest in the first quarter, and the demand is the strongest in the second and fourth quarters, which is the traditional peak season. Based on the relationship between price, inventory and demand, these data can also represent the seasonal characteristics of PVC powder to some extent. When the supply is high in the first quarter, the demand is low in the season, PVC inventory presents a rapid inventory depletion trend, and the inventory declines gradually in the second quarter to the fourth quarter.
From the point of view of cost, PVC can be divided into two kinds of processes according to the source of raw materials, calcium carbide process accounted for nearly 80%, is the main driving factor affecting the market trend, ethylene process accounted for a relatively small proportion, but has obvious substitution effect on the carbide material, has a certain regulatory effect on the market. The main raw material of calcium carbide process is calcium carbide, which accounts for about 75% of the cost of PVC and is the most important factor affecting the cost change. Over the long term, neither losses nor excess profits are sustainable. Profit is the main factor to be considered in the production of enterprises. As different enterprises have different production cost control abilities, in the face of the same market, enterprises with poor cost control ability will be the first to suffer losses, forcing them to adjust their production strategies, and the main strategy is to adjust the pace of production and control output. After supply and demand return to the equilibrium state, the form of price will change. Profits are back to normal. The most sensitive factor to profit is the price itself. Profits tend to improve as prices rise and contract as they fall. When the main raw material price trend appears to deviate from the most prone to super profit situation. PVC powder is the largest consumption of chlorine products, so PVC powder and caustic soda are the two most important supporting products, calcium carbide method of PVC powder enterprises almost all supporting caustic soda, so PVC powder on the loss of strong ability to withstand, most enterprises will consider the integrated profit of caustic soda and PVC to adjust the production strategy.
Post time: Mar-15-2023