Huatai Futures: PVC Market Short-term Supply and Demand Weak, Medium to Long-term Outlook Strong

PVC starting April 1st, export tax rebates are canceled. The “race to export” has led to relatively strong export orders, while export signing slowed down before the holiday. This week, compared to before the holiday, orders increased, and upstream inventory pressure is not significant. The overall supply and demand pattern in the market remains weak; domestic supply is ample, with no new maintenance companies, but spring maintenance is expected to increase in April. On the demand side, downstream production dropped sharply due to the Spring Festival holiday but will gradually recover after the holiday. Social inventories accumulated after the holiday and are at high year-on-year levels. From the cost perspective, upstream chlor-alkali production profits have slightly recovered with PVC price increases but remain low compared to last year. Calcium carbide prices have fallen, and lignite prices are stable, with lignite profits still in loss. PVC warehouse receipts are at high levels for the same period, and hedging pressure in the futures market persists. Despite the weak supply and demand, the export rush sentiment provides some support to spot prices. Coupled with the Ministry of Ecology and Environment’s renewed push for mercury-free transformation, which boosts market expectations for PVC long-term costs, and the valuation recovery in the chemical sector attracting capital, the medium- to long-term outlook for PVC is relatively strong. However, the inventories accumulated during the Spring Festival holiday and the incomplete recovery of downstream production will keep short-term supply and demand weak. As downstream production resumes, spring maintenance expectations heat up, and macro expectations improve with the Two Sessions, along with Shanghai further relaxing housing purchase restrictions, market sentiment is expected to improve. Key factors to watch include the pace of downstream resumption, inventory changes, and macroeconomic expectations. (Huatai Futures)