★ with the advent of seasonal maintenance, the PVC output may drop significantly in the second quarter
Looking forward to the second quarter, as the new production capacity is very limited and the spring overhaul is coming, the PVC output may fall significantly.
★ the favorable export in the second quarter is expected to continue
From January to February this year, China exported 254000 tons of PVC powder, a year-on-year decrease of 10%, but it is still at a high level. A large number of exports have effectively alleviated the domestic supply pressure. It is understood that there are still more than 150000 tons of export orders to be delivered in the upstream.
Looking forward to the second quarter, due to port congestion and strong domestic demand in the United States, its exports are expected to remain low. At the same time, under the background of the conflict between Russia and Ukraine, high oil prices may have an impact on European plant production. Therefore, it is expected that the favorable domestic export in the second quarter is expected to continue.
★ under the background of steady growth, with the improvement of the epidemic situation, the demand is expected to increase month on month
In March this year, the two sessions clearly put forward the GDP growth target of 5.5%. Steady growth has become the focus of the current government work. Subsequently, the real estate industry continues to relax policy control, and the follow-up real estate is expected to stabilize and recover. At the same time, the short-term epidemic has had a certain impact on demand. With the past of the epidemic, this part of demand is expected to recover.
★ investment suggestions
Looking forward to the second quarter, due to the existence of seasonal maintenance, the high decline of PVC output is basically a foregone conclusion. High oil prices and congestion in U.S. ports are expected to continue strong exports in the second quarter. Therefore, the domestic effective supply rate in the second quarter will decline month on month. At present, the weak real estate data and the serious domestic epidemic make the current demand weak. However, in the context of steady growth, real estate related regulatory measures are being relaxed. Therefore, with the improvement of the epidemic situation and the implementation of relevant steady growth measures, the demand in the second quarter will probably increase month on month. Overall, we believe that PVC supply and demand increased in the second quarter, and the price may remain strong.
★ risk warning
Demand performance was less than expected.
Full report
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With the advent of seasonal maintenance, PVC production in the second quarter is expected to decline month on month
The chlor alkali industry will be overhauled at least once a year due to the particularity of its devices. And mostly concentrated in spring and autumn. In particular, the maintenance in spring is particularly important. After a high load operation in winter, most units must complete the maintenance before the arrival of high temperature in summer to ensure the safe operation of the unit. According to the maintenance loss data over the years, after entering April, the maintenance will be carried out gradually in spring. At present, some enterprises have announced their maintenance plans. It is expected that more enterprises will announce their maintenance plans one after another with the progress of time.
In terms of new capacity, it was still very limited in the first half of the year. At present, Tianjin Dagu 800000 T / a ethylene process plant is relatively reliable. However, due to the replacement of production capacity, the new output is relatively limited. On the whole, affected by the seasonal maintenance, we expect the PVC output in the second quarter to decline month on month.
The positive export in the second quarter is expected to continue
From January to February this year, China exported 254000 tons of PVC powder, a year-on-year decrease of 10%, but it is still at a high level. A large number of exports have effectively alleviated the domestic supply pressure. It is understood that there are still more than 150000 tons of export orders to be delivered in the upstream.
Looking forward to the second quarter, we believe that the positive export is expected to continue. First of all, domestic exports have been performing well since last year, which is essentially due to the export reduction of the world's largest PVC exporter (the United States). According to the latest data, as of January this year, although the production of PVC plants in the United States had resumed, its exports remained low. We expect that this aspect may be related to its port congestion and shipping difficulties. On the other hand, it may also be because its domestic real estate market is booming, resulting in strong domestic demand and occupying the source of export goods. Therefore, we expect US exports to remain low in the second quarter.
In addition, the conflict between Russia and Ukraine caused a sharp rise in international crude oil prices. On the one hand, it will increase the production cost of overseas ethylene PVC. On the other hand, the operation stability of PVC plants in Europe will also be affected. After all, about a third of its oil and gas is dependent on Russian supply. Europe has a PVC production capacity of about 8 million tons / year, accounting for about 15% of the world. Although the recent increase in PVC prices is not significant, it is still worthy of our attention in Europe.
On the whole, under the background of the reduction of U.S. exports and the continuous rise of international oil prices, China's positive exports in the second quarter are expected to continue.
Focus on possible policy disturbances in the second quarter
Last year, PVC went out of a magnificent market. An important driving factor behind it is the continuous contraction of the supply side caused by dual control of energy consumption. Although in the context of steady growth, the government has significantly weakened the requirement of dual control of energy consumption this year. At last year's central economic work conference, it was clearly put forward that "new renewable energy and raw material energy consumption will not be included in the total energy consumption control." In theory, 1.9 tons of raw coal and 1.6 tons of standard coal are required to produce 1 ton of PVC. Therefore, if the raw coal is no longer included in the total energy consumption control, it means that the energy consumption for producing one ton of PVC will drop by more than 50%. As a result, the dual control pressure that provinces and cities need to complete this year will also drop significantly. However, it is worth noting that the dual control of energy consumption in the first quarter hardly caused any disturbance to the supply side. With the introduction of the completion of energy consumption in various provinces and cities last year, it is not ruled out that the supply may be disturbed again in the second quarter. This policy risk needs our focus.
In addition, in December 2021, the inspector of the third ecological and environmental protection supervision group of the CPC Central Committee found that some places in Yulin City were ineffective in eliminating the backward production capacity of blue carbon, frequent illegal construction problems, extensive production methods and prominent environmental problems in industrial parks. Subsequently, Yulin issued a document demanding that we resolutely clean up and rectify the illegal construction and energy-saving review of blue carbon and blue related projects. Specifically, it mainly involves two aspects. First, for new projects that have not completed the relevant approval procedures, including technical transformation projects, the construction can be continued only after completing all the approval processes. Second, accelerate the elimination of 75000 T / a small furnaces that do not meet the national standards, involving a relevant production capacity of about 11 million T / A. At that time, many furnaces were also responsible for heating in winter, so they were not shut down for rectification. With the passing of the heating season, the market began to frequently spread the news that this part of the furnace may be shut down for rectification. However, it should be pointed out that at present, Yulin has a capacity of 74 million tons of blue carbon per year, and the output is only 35 million tons. Even if all small furnaces are eliminated, it can only reduce but not change the pattern of overcapacity. Therefore, the decline in calcium carbide production caused by the lack of blue carbon should not occur. However, the disturbance at the supply side of blue carbon will obviously support the price of PVC through the cost side.
On the whole, the first quarter was a policy window period, and the PVC supply was basically not disturbed by the policy. However, as PVC, calcium carbide and blue carbon are two high-tech projects, it remains to be seen whether they can continue to be undisturbed in the second quarter.
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After the steady growth is gradually implemented, the demand is expected to rise month on month
During the two sessions in March this year, the government clearly put forward the target of GDP growth of 5.5%. Steady growth has become the focus of government work. On March 29, Premier Li Keqiang presided over the executive meeting of the State Council and pointed out that "we should strengthen confidence, stick to the annual development goals, and put steady growth in a more prominent position. Policies to stabilize the economy should be carried out early and quickly, and measures that are not conducive to stabilizing market expectations should not be taken".
From January to February, the sales area of commercial housing decreased by 9.6% year-on-year; The cumulative area of new construction decreased by 12.2% year-on-year. The completed area of real estate decreased by 9.8% year-on-year; The cumulative land acquisition area decreased by 42.3% year-on-year. The data related to real estate from January to February are still weak. However, in the context of steady growth, the regulatory policies of the real estate industry began to relax. On the one hand, some cities continue to relax the relevant policies of purchase and loan restrictions. On the other hand, mortgage interest rates have also been reduced to varying degrees. Considering that it will take some time from the introduction of the policy to the actual effect, we expect that the demand for PVC related to real estate is expected to increase month on month in the second quarter.
The epidemic has a short-term impact on demand and is expected to recover later
Recently, the domestic epidemic has deteriorated significantly, especially in Shanghai, and the number of new confirmed cases is still rising. Apart from Shanghai, the epidemic situation in Jilin is equally serious. As of April 5, there were 46 high-risk areas and 246 medium risk areas involving multiple provinces and cities.
The short-term impact of the epidemic on local demand is obvious. Especially in Shanghai, as the core region of East China, the serious epidemic has inevitably had an impact on the local PVC demand. On the one hand, some construction sites shut down and the downstream shut down, which directly caused the decline of PVC demand. On the other hand, the epidemic has caused problems in logistics and transportation. This also interferes with downstream production.
On the whole, the epidemic situation, especially the serious epidemic situation in Shanghai, has inevitably had a certain impact on short-term demand. However, we firmly believe that under the current strict epidemic prevention measures, the epidemic is expected to basically end within one month, and the demand rate will probably recover at that time.
Investment advice
Looking forward to the second quarter, due to the existence of seasonal maintenance, the high decline of PVC output is basically a foregone conclusion. High oil prices and congestion in U.S. ports are expected to continue strong exports in the second quarter. Therefore, the domestic effective supply rate in the second quarter will decline month on month. At present, the weak real estate data and the serious domestic epidemic make the current demand weak. However, in the context of steady growth, real estate related regulatory measures are being relaxed. Therefore, with the improvement of the epidemic situation and the implementation of relevant steady growth measures, the demand in the second quarter will probably increase month on month. Overall, we believe that PVC supply and demand increased in the second quarter, and the price may remain strong.
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Risk statement
Demand performance was less than expected.
