Chinese PVC Converters Put Off Procurement Activities On The Back Of Manifold Factors
- Local PVC offers propped up by the futures prices and supply chain concern
- Players concerned on second wave lockdown in Xinjiang to affect supply, logistics and transportation
- Firm futures prices expected to forestall local PVC prices from falling
A number of Chinese converters decided to put off procurement activities on the back of manifold factors, SSESSMENTS.COM noted. On the week starting July 20, local PVC offers in the China market increased owing to the firmer futures prices and supply chain concern. As noted, local offers for both acetylene-based and ethylene-based PVC cargoes from several sellers went up between CNY50-100/ton ($7-14/ton) on a weekly comparison. On the other hand, some converters reported receiving offers from a Chinese ethylene-based PVC producer at a stable level from the same period. To date, some deals for acetylene-based PVC cargoes managed to conclude at CNY50/ton ($7/ton) lower than the initial offer levels, or at CNY6,550/ton ($936/ton) on cash, EXW China basis and including 13% VAT. Whereas to the export market, no offers were captured as some producers cited that their companies were still contemplating whether to announce offers to the export market or not considering the demand window has yet to open in the destination countries.
In general, demand for PVC resins in China’s domestic market remains slow this week. Most converters have to delay fresh procurement activities due to squeezed margins, sufficient inventory level, as well as dull demand for finished products amid the traditional low season. Meanwhile, some other converters that need to do replenishment prefer to procure on a hand-to-mouth basis amid market uncertainty. On the supply front, as of July 20, the total acetylene-based PVC inventory in coastal China stood at 264,500 tons, accumulated by 4,000 tons from last week. In South China recorded at 41,500 tons, digested by 1,500 tons while in East China, stood at 223,000 tons, increased by 5,500 tons. On the production sector, SSESSMENTS.COM was told that some PVC producers in Xinjiang plan to reduce production rate due to uneasiness regarding upstream raw materials supply as well as logistics and transportation stemming from the second wave of lockdown in the region. Yet, for now, some producers in the region reported still have sufficient inventory since production activity has yet to be affected.
For the outlook, the majority of Chinese market players contacted by SSESSMENTS.COM believe that local PVC prices will fluctuate within a limited range. The chance of drop is rather low considering the firm futures prices. Demand-wise, players opined that buying sentiment will remain sluggish in the upcoming week as buyers will keep staying on the sidelines due to high prices.
