In July, the domestic PVC market generally trended downwards, with prices continuing to decline. The benchmark price for SG-5 PVC in East China was 5686 yuan/ton, a 3.41% decrease compared to the previous month. The core issue causing the PVC market to fall back into a downward trend this month is the unresolved imbalance between supply and demand, with oversupply continuing to dominate market trends. Although PVC production facilities underwent concentrated maintenance in July, reducing the overall industry operating rate to around 70%, providing some relief to the supply side, demand remained weak due to the traditional off-season. Downstream companies had insufficient orders and low willingness to purchase raw materials, resulting in consistently high social inventories. Ultimately, under the oversupply situation, PVC prices continued to decline.

Detailed Fundamental Review

Supply Side: China's PVC production in July is estimated at 185.72 tons, a decrease of 3.68% month-on-month and 2.73% year-on-year. The significant decline in output this month was mainly due to the concentrated maintenance work carried out by several PVC production enterprises in Northwest China, which directly led to a decrease in the industry's operating rate and consequently affected overall output. In terms of cumulative output, the total domestic PVC output from January to July reached 13.5252 million tons, an increase of 4.15% compared to the same period last year, with the overall supply scale still maintaining a year-on-year growth trend.

On the demand side: The overall operating rate of downstream PVC industries in July is estimated at 53%, a decrease of 1.47% month-on-month but an increase of 8.45% year-on-year. Specifically, the operating rate of pipe manufacturers has long been at a low level, with the average operating rate in July estimated at 49%, a decrease of 1.07% month-on-month; the operating rate of profile manufacturers in July is estimated at 46%, a decrease of 2.86% month-on-month; and the operating rate of cable and film manufacturers is estimated at 76.67%, a decrease of 0.94% month-on-month. The current sluggish recovery in the real estate sector and poor new project commencement are directly impacting downstream demand, leading to weak demand for PVC pipes and profiles. This intensifies competition within the industry, squeezing market space.

August Market Forecast

 Entering August, routine maintenance schedules for PVC production plants will gradually decrease, while some previously shut-down production facilities will resume operation. Industry output is expected to increase, maintaining an overall ample supply. On the demand side, the sluggish trend is unlikely to reverse quickly in the short term. Downstream companies are experiencing weak order volumes, limiting their consumption of PVC raw materials, and the pace of social inventory reduction remains slow.

It is expected that the PVC market will reach a transition point between peak and off-peak seasons in late August. With rising expectations of peak demand, PVC prices are expected to see a phased rebound. However, it should be noted that current market inventory remains high, a situation unlikely to change in the short term. Therefore, the potential for price increases will be significantly limited. The mainstream price for SG-5 PVC in East China is expected to be around 5720 yuan/ton.