Fundamental Demand And Supply Factors Serve As A Cushion For PCV Prices In China

The implementation of 25% tariff on Chinese products in the U.S and China’s counter-attack by imposing the same rate of tariff on the U.S goods have caused downward corrections of the futures market. On a weekly comparison, September 2019 PVC futures on the Dalian Commodity Exchange decreased by CNY210/ton ($30.5/ton) on Monday’s settlement. In line with the futures market, local PVC spot offers in the China market were also adjusted down between CNY50-100/ton ($7.2-14.5/ton) compared to a week earlier. However, some producers reported to SSESSMENTS on maintaining stable offers considering current demand and supply balance. In general, deals were concluded at nearly the same level as initial offers. Most producers balk at offering to the export market as based on domestic prices, export prices should be between $900-940/ton on LC at sight, FOB China main ports basis. On the other hand, the largest acetylene-based PVC producer in the country decided to keep offers stable at $895/ton with the same payment and delivery terms.

Demand for PVC in China is still robust due to the peak season. Moreover, the government has previously announced plans for more infrastructure development projects, therefore sentiment is still positive in the market. Meanwhile, market inventory continues to decline due to ongoing maintenance season as well as safety inspection after several explosions in the past few months. According to SSESSMENTS’ sources, at the beginning of the week, China’s PVC market inventory stood at 346,000 tons, decreased around 14,000 tons compared to the level at the same period last week.

Most market players agree that the possibility to see a significant reduction of PVC prices in China is thin unless there is a major shock in macroeconomic that causes significant corrections of the futures market. Producers will try to maintain local offers at above CNY7,000/ton ($1,019/ton) on cash, EXW China basis and including 13% VAT, a Chinese producer told SSESSMENTS.

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