Introduction
In the first quarter of 2024, there was not much pressure on the supply and demand fundamentals of the PVC Paste Resin market, but the market mentality gradually weakened, with prices rising first and then falling. The supply pressure of PVC paste Resin gradually increased in the second quarter, and it is currently difficult to find bright spots on the demand side. The price center may shift downwards compared to the first quarter.
In the first quarter of 2024, the price of PVC paste resin in China showed a trend of first rising and then falling. The average price of PVC paste resin in the East China market was 7993 yuan/ton, a slight increase of 0.01% month on month and a year-on-year increase of 2.65%; The average price of PVC paste resin in the North China market is 8313 yuan/ton, an increase of 1.77% month on month and 6.98% year-on-year.
From the quarterly price trend, the demand for PVC paste resin glove materials was good from January to February. Downstream replenishment demand increased before the Spring Festival, and supply side enterprises had low inventory, resulting in a continuous increase in PVC paste resin prices. In March, the demand for bulk materials was insufficient, and the market mentality was weak. The pressure on enterprises to ship increased, and the price trend declined. The peak of the first quarter was in early March, with a daily average price of 8150 yuan/ton for PVC paste resin bulk materials in the East China market and 8500 yuan/ton for PVC paste glove materials in the North China market; The low point was in early January, with a daily average price of 7800 yuan/ton for PVC paste resin bulk materials in the East China market and 8150 yuan/ton for PVC paste resin glove materials in the North China market.
The main logic of the price trend in the first quarter of 2024 is as follows: 1. The demand side has shown uneven performance, with flat demand for bulk materials and good demand for Pvc Resin gloves; 2. Supported by the demand for PVC paste resin glove materials, the shipment of PVC paste resin enterprises using micro suspension method has improved. Enterprises have adjusted the output ratio of PVC paste resin large plate materials to PVC paste resin glove materials to alleviate supply pressure; 3. Before the Spring Festival, the market mentality was good, and there was a significant demand for downstream restocking before the festival. However, the recovery of demand after the festival was limited, and the export volume decreased month by month, weakening the market mentality and forming a bearish impact on prices.
The export of PVC Resin gloves continues to improve, supporting the demand for glove materials
The export of PVC paste resin gloves products was good in the first quarter of 2024. According to data from the People's Republic of China Customs, the export volume of PVC gloves from January to February 2024 was 7.574 billion pairs, an increase of 32.91% compared to the same period in 2023, and an increase of 0.71% compared to the export volume from November to December 2023. Since the fourth quarter of 2023, there has been an increase in overseas demand for PVC glove products, mainly due to a decrease in overseas glove product inventories and an increase in overseas market replenishment demand, which has driven a significant increase in export demand for PVC glove products. It is understood that due to the increased frequency of replacement of glove products in summer and early stocking in overseas markets, the overseas demand for glove products will remain positive in March 2024. It is expected that the overall export volume of PVC gloves will remain high in the first quarter, supporting the demand for glove materials.
The industry maintains a high level of production, and the pressure on enterprise shipment inventory varies
Compared to the same period last year, the production of PVC paste resin in the first quarter of 2024 increased by 12.28%, with a total production of 295500 tons of PVC paste resin in the first quarter. The industry's operating load rate was 72.41%, an increase of 8.9 percentage points from the same period last year. Although the industry's operating load rate remains relatively high, most enterprises had no worries about inventory from January to February. This is because some PVC resin production enterprises had ideal pre-sale orders in the early stage of the Spring Festival. On the one hand, it is supported by the demand for PVC resin glove materials, and on the other hand, downstream PVC resin product enterprises have a good demand for replenishment before the Spring Festival. However, in March, the demand for PVC paste resin in the market recovered less than expected. Some downstream product industries, such as leather, toys and other industries, started construction and orders were weak, and the demand was weak. In particular, the shipping pressure of lotion PVC paste resin enterprises increased, and the price declined significantly. The micro suspension PVC paste resin enterprise, supported by the demand for glove material, adjusted the output ratio of PVC paste resin glove material to PVC paste resin in a large scale. The overall pressure was small, and the price decline was not as large as the lotion PVC paste resin brand.
The gross profit of a single product is good, and the industry maintains a relatively high level of production
Supporting the PVC paste resin industry to maintain a relatively high operating load rate in the first quarter, in addition to no pressure on enterprise inventory and good pre-sales, single product profitability has remained positive, which is also the reason for supporting the industry to maintain a relatively high operating load rate. In the first quarter, the average gross profit per product of PVC paste resin enterprises purchasing calcium carbide from the north was 480 yuan/ton, an increase of 135 yuan/ton from the fourth quarter of last year and an increase of 1437 yuan/ton from the same period last year. From January to February, there was abundant supply of calcium carbide, and transportation slowed down due to the impact of the Spring Festival holiday, causing the price center to shift downwards. However, the price trend of PVC paste resin was upward, and the profit of PVC paste resin single product was relatively high. In March, the supply of calcium carbide was tight, and the price trend was upward. Although the price of PVC paste resin loosened, the decline was limited, and the overall profit of PVC paste resin remained optimistic.
The monthly export volume has declined, and some companies are facing increased inventory pressure
According to data from the General Administration of Customs of the People's Republic of China, the export volume of PVC paste resin from January to February 2024 was 22600 tons, a decrease of 4.12% compared to the same period last year and a decrease of 2.10% compared to November December 2023. The decrease in export volume is partly due to the impact of the February Spring Festival holiday, and on the other hand, the settlement cycle for goods exported to Europe has been extended, affecting the export volume for the current month. It is understood that the supply of goods exported to Europe in March may continue to decrease, and this situation will continue for a period of time. Affected by this, a PVC paste resin enterprise in East China saw a significant decrease in export volume in March, leading to increased inventory and domestic sales pressure.
Looking ahead to the second quarter, the expected improvement in the fundamentals of PVC paste resin is limited, with weak cost support and insufficient confidence among market participants. It is expected that the market price center will decline compared to the first quarter.
There are not many planned maintenance enterprises, and there is still pressure on the supply side
It is expected that there will not be many PVC paste resin production enterprises planned for maintenance in the second quarter, and the industry's operating load rate may remain at a relatively high level. The supply pressure on enterprises will continue to increase, and there is a downward expectation in market prices. If the decline increases, PVC paste resin production enterprises that purchase calcium carbide will first suffer losses. In the future, attention should still be paid to the possibility of individual enterprises undergoing early maintenance if their losses increase.
Uneven demand expectations make it difficult to have a significant boost overall
From the demand side, the downstream product industry's demand expectations or performance in the second quarter may vary. The downstream glove product industry of PVC paste resin glove material started construction in the second quarter or maintained a positive trend. Currently, some large glove product enterprises have fully received orders from April to May, and there is still support for the demand for matching materials. However, the downstream mentality has slightly changed. On the one hand, this is because the price of PVC paste resin in March began to decline, which will drag down the price of PVC paste resin glove material; On the other hand, some glove product companies still have some raw material inventory, so the demand for high priced PVC paste resin glove materials has weakened, and there is an expectation of a downward trend in the price of PVC paste resin glove materials.
The downstream industries such as leather products are still in a low demand season in the second quarter, and the demand for coated fabrics and toys may not change much. However, the downstream mentality is not good. At the end of the first quarter, the price of PVC paste resin began to decline, and the price center of plasticizers shifted downwards. Some downstream product industries have loosened their order prices, and downstream enthusiasm for raw material procurement has weakened. In the second quarter, the downstream product industry may continue to focus on essential procurement during the price downturn phase, and market participants may continue to have a cautious attitude.
In terms of exports, it is expected that the supply of goods exported to Europe will decrease, and the expected decrease in export volume in the second quarter will increase the pressure for some enterprises to convert their exports to domestic sales.
Insufficient support on the cost side, expected reduction in comprehensive gross profit of chlor alkali
There is an expectation of a decline in the price of calcium carbide in the second quarter. On the one hand, the resumption of calcium carbide production has led to an increase in supply, and on the other hand, the maintenance of PVC powder is gradually increasing, resulting in a decrease in demand for calcium carbide. Meanwhile, there are also expectations of a decline in Caustic Soda prices during the same period, mainly due to high production in most areas of the caustic soda supply side in April, little change in demand side expectations, and some terminals having some inventory, so purchasing enthusiasm may be average. In May, as supply side maintenance increases, supply pressure may ease and prices may rise. June has entered the traditional off-season of demand, and prices may once again be under pressure. Overall, both calcium carbide and caustic soda are expected to decline in the second quarter, while the cost support for PVC paste resin is average.
Overall, the PVC paste resin industry has not yet entered the centralized maintenance season in the second quarter, and the utilization rate of existing production capacity on the supply side remains relatively high. The pressure on enterprise inventory and shipment is gradually increasing; On the demand side, it is difficult to be optimistic, and there are weak expectations for exports. It is expected that the price of PVC paste resin may continue to decline. However, if PVC paste resin production enterprises experience losses in the future, it is not ruled out that some enterprises may have early maintenance or load reduction to alleviate supply pressure.
