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PVC market volatility, supply and demand contradiction or lead to the second bottom 2010-07-12 00:00 Click: second

Zhao Yudao, analyst of jinyindao Market:
The market has continued to decline, and the downward trend has gradually moved to the low level of the year. However, the falling price can not effectively stimulate procurement, and there are still many obstacles and difficulties restricting the development of the market. From the current market situation, combined with the high production capacity, real estate regulation, energy conservation and emission reduction, cost rise and demand compression and other factors in recent years, relevant people in the industry agree that the contradiction of PVC overcapacity is gradually highlighted this year, and the oversupply will become a normal.
High production capacity
The overall production capacity of PVC in China has rapidly increased from 3.2 million tons in 2000 to 17.25 million tons, with an increase of 5 times in 8 years. Among them, the capacity expansion of PVC by calcium carbide method is particularly rapid, with an increase of 6.5 times. Meanwhile, the apparent consumption of PVC increased from 5.944 million tons in 2001 to 10.26 million tons in 2007. In 2009, the total output of PVC in China was 9.155 million tons, 11% higher than that of 8.246 million tons in the same period of 2008. In the first five months of this year, the cumulative output was 4.5581 million tons, up 18.8% from 3.8361 million tons in the same period last year. From January to May 2010, the total import volume was 449200 tons. From this year's point of view, the national output and capacity expansion investment will still maintain the growth momentum. The closure speed of some small enterprises is obviously slow, and the reshuffle speed of the industry is still slow, resulting in the pattern of supply exceeding demand continuing to expand.
Bottom or bottom again
It should be noted that the domestic market remained in a negative downward trend from April to June. Although it was slightly stable in late May, the decline was aggravated again. Demand in various fields has been restricted by import and export trade, national policies, real estate and other aspects. The growth is weak, and the price has declined. Since the beginning of May, the overall decline has been close to 500 or more. In addition, it does not play a role in strengthening the consumption of traditional products in the peak season. The weak pattern of the demand market and the increasing pressure on the supply side have brought great uncertainty to the PVC market. At present, there is still the possibility of a second bottoming out.
Real estate regulation restricts demand
In the short and medium term, real estate regulation is undoubtedly an important factor to restrain the downstream industry's demand for PVC. The state has issued a number of macro-control measures represented by the real estate industry. In addition, the impact of the European debt crisis on China's import and export and the impact of energy conservation and emission reduction and other factors, China's current economic heat has declined in the early stage. Judging from the economic data in May, the output growth rate of most products including thermal power, steel, nonferrous metals, coke, caustic soda and other products in the main energy consuming industries continued to accelerate growth.
Comprehensive analysis shows that the domestic PVC market may have a certain degree of resilience compared with other varieties, but the pressure of inflation and the contraction of policies, especially the new real estate policy, have brought a relatively heavy blow to the overall consumption of PVC industrial products. In the first half of the year, PVC followed the general trend. At the same time, if we enter into August / September, the hard index of local demand can play a supporting role, and with the implementation of the new upstream production reduction plan, the market may have the opportunity to return to the previous high level. If the supply and demand of PVC is not stable, it will be more difficult for PVC to face the pressure of double side supply and demand. The focus of attention is still on the demand side and the implementation trend of some new investment capacity.

Source: Treasure Island
[source: (editor in charge: Song Yuan)



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