I. Supply and Demand Imbalance: The Dual Constraints of High Supply and Weak Demand

Last week, the capacity utilization rate of PVC production enterprises was 76.84%, a slight increase of 0.05% week-on-week and a year-on-year increase of 3.64%. Among them, the capacity utilization rate of the calcium carbide method was 76.03%, a decrease of 3.22% week-on-week and a slight decrease of 0.28% year-on-year, while the capacity utilization rate of the ethylene method was 78.99%, a significant increase of 8.71% week-on-week and a year-on-year increase of 14.68%. This week, the PVC capacity utilization rate is expected to continue to improve. Maintenance at the Xinjiang Fukang plant and the Errong No. 1 plant has been successfully completed, while the maintenance plan for the Errong No. 2 plant has been postponed. In addition, the operating rates of other enterprises are steadily increasing, which will drive an overall increase in industry output. The core contradiction in the current PVC market remains focused on strong supply and weak demand: A relatively large number of enterprises planned maintenance in August, including Errong No. 2 plant, Junzheng Wuda plant, and Xinzhongjia, all have subsequent maintenance arrangements. However, Fujian Wanhua's 500,000-ton new capacity has already been put into the market, so the overall market supply remains relatively abundant. On the demand side, the continued drag from the deep adjustment of the real estate cycle has kept demand for rigid PVC products such as pipes and profiles sluggish, with downstream enterprises' operating rates hovering at historically low levels for an extended period. Regarding exports, while domestic PVC market prices are currently rising, foreign buyers are mostly adopting a wait-and-see attitude, with limited purchasing enthusiasm. Simultaneously, it is currently the off-season for demand in India, putting significant pressure on increasing export orders.

II. Inventory Pressure: A Vicious Cycle of High Levels and Slow Reduction

As of July 31, PVC social inventory (new sample statistics) increased by 5.67% month-on-month, reaching 722,100 tons, and decreased by 24.10% year-on-year. Specifically, inventory in East China was 659,100 tons, an increase of 5.44% month-on-month and a decrease of 27.13% year-on-year; inventory in South China was 63,100 tons, an increase of 8.08% month-on-month and an increase of 34.15% year-on-year. Inventory pressure has been rising for several consecutive weeks, and the difficulty of inventory reduction continues to increase, mainly due to two factors: First, weak downstream demand and poor end-user orders have resulted in weak restocking intentions from enterprises, making it difficult to effectively release demand for raw materials; second, the continuous release of new production capacity coupled with high operating rates of production facilities has kept the market supply abundant. Furthermore, the current firm PVC price trend has further exacerbated the wait-and-see attitude of downstream enterprises, with downstream procurement still mainly focused on buying on dips and as needed, making it difficult to form large-scale restocking, further hindering inventory reduction.

III. Costs and Profits: Industry Resilience Under the Normalization of Losses

PVC production profits have been in a state of deep loss for two consecutive years, but chlor-alkali integrated enterprises still maintain the "alkali-for-chlorine" operating model, relying on the profit support of caustic soda business to ensure that PVC production facilities maintain high operating rates, demonstrating the industry's strong resilience.

This week, the domestic calcium carbide market saw price increases, with the current mainstream trading price of calcium carbide in the Wuhai area at 2300 yuan/ton. Affected by the continued implementation of recent production cut policies, the supply of calcium carbide has gradually weakened, leading to a temporary depletion of market inventory. With the increase in the number of plants undergoing maintenance recently, the contraction in calcium carbide supply has become increasingly apparent. It is expected that mainstream trading prices in the Wuhai region will be raised tomorrow, further strengthening the cost support for calcium carbide-based PVC.

Regarding ethylene, the tight supply situation continues, while downstream enterprises still have essential purchasing needs. To ensure stable production, downstream enterprises are actively engaging in external procurement, and ethylene prices are expected to have some room for further slight increases. Currently, the spot transaction range for ethylene in East China is around 6900 yuan/ton, while the US dollar market price is between 800-840 USD/ton. The firm ethylene price has improved the cost support for ethylene-based PVC.

In terms of profit, although PVC prices have risen slightly recently, the prices of raw materials such as calcium carbide, ethylene, and liquid chlorine have all increased simultaneously. It is expected that PVC production costs will rise significantly this week, and the average profit of PVC is expected to decline compared to last week. Downstream enterprises are strongly resistant to high PVC prices, and against the backdrop of weak demand, the industry's profit losses are unlikely to improve in the short term.

IV. Policy and Macroeconomics: A Two-Way Game Between Expectations and Reality

Recently, the market has frequently heard news related to "anti-involution competition and elimination of outdated production capacity," providing some support for industry development expectations. Currently, the overall economy is sluggish, and the government continues to release a series of policies to boost the economy. Ferrous metal products are strongly influenced by these policies, leading to higher prices and consequently increasing the costs of other related products. PVC is affected by this, maintaining a generally firm trend. However, the fundamentals of PVC remain weak. Internationally, PVC pure powder and related products are currently affected by foreign policy barriers, further increasing export pressure and constraining the release of industry demand.

In summary, the fundamentals of the domestic PVC market have not shown any substantial improvement recently. Upstream producers have seen fewer maintenance shutdowns coupled with the release of new capacity, leading to a significant increase in market supply compared to the previous period. Domestic demand remains stable, and exports are mainly focused on fulfilling previous orders, with limited new orders. This further exacerbates the supply-demand imbalance, and industry inventory is expected to accumulate significantly, putting pressure on the market. On the macro level, driven by the rise in futures prices for ferrous metals such as coking coal, PVC futures prices have seen a slight increase. At the same time, rising raw material prices have strengthened cost support, but the overall impact is relatively limited. In the short term, the PVC market fundamentals remain under pressure from both supply and demand, and spot prices are likely to fluctuate with a slightly downward trend. Futures prices are susceptible to fluctuations due to macroeconomic sentiment. The spot price for calcium carbide-based PVC (type V) in East China is expected to be in the range of 4800-4950 yuan/ton.