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Recently, the prices of the plastics futures represented by PVC have continued to increase, drawing attention widely in the market. According to analysis, with the impact of the fundamentals such as relatively low inventories, the upstream factories and trading companies are generally reluctant to sell out, resulting in the bullish situation. In addition, since the registered brand delivery system was implemented on the PVC futures, the high quality goods have entered the delivery process, which has enhanced the representativeness of the futures prices and the investors’ confidence. The system has received positive responses from the market and energetically supported the supply-side reform in the plastics industry.
Luo Zhen, an analyst with New Era Futures, said that as the domestic bulk commodities are now in the process of rebound, the recent price increases are understandable for the products with relatively good fundamentals like the plastics. He also said that at the supply end the increasing equipment overhaul to be implemented in July and August will result in decreasing supplies accordingly, and at the same time the supply-side reform has caused the inventories of the petrochemical companies to decline continuously. The factors have pushed the prices of the futures of the petrochemical products to reflect the expectations for the market in the future. In the meantime, although the crude oil prices recorded drops under the impact of the Brexit vote last Friday, the international crude oil prices have been on the rise in the second quarter, providing boost for the downstream petrochemical products.
The previously inactive PVC futures have seen the market participation increased recently. It is widely believed in the market that the boost from the fundamentals is the main cause. Ma Liping, director of the petroleum and petrochemical business department of CEFC Wanda Futures, said that the situation of the spot market shows that the slowdown of the macroeconomic growth in recent years has made the market participants generally pessimistic about the market in the future, and the upstream factories mostly adopt the strategy of negative-inventory sales, basically maintaining the oversell pattern. At the same time, the inventories of the trading companies are also declining and the downstream enterprises have adhered to the principle of purchasing on immediate demand, with the inventories at relatively low levels. In addition, the growth of the exports has also been buoyant. The two factors combined have made the domestic inventory at a relatively low level. Furthermore, the G20 Hangzhou Summit will be held on September 3 and 4, which will affecting the transportation in the areas around Zhejiang Province. All the factors have resulted in this round of price increases.
The surging exports and low-inventory operation of the PVC have been confirmed by the association and the producing enterprises. Zhang Peichao, deputy secretary-general of China Chlor-Alkali Industry Association (CCAIA), said that the PVC exports have recorded significant increases this year. From January to May, 2016, China’s total exports of PVC pure powder reached 469,000 tons, an increase of 38.8% from 338,000 tons recorded in the same period of last year. The increasing exports have contributed a lot to the reduction of the PVC social inventories this year. An official of Xinjiang Tianye also pointed out that in the first half of this year, the company’s PVC exports reached 210,000 tons, far more than last year’s total exports of 30,000 tons, and it has already received export orders of 40,000 tons for July.
