In May 2024, the domestic PVC market showed a continuous upward trend, with prices steadily rising. The benchmark price for SG-5 PVC in East China was 5856 yuan/ton, a 4.65% increase compared to the previous month. The core drivers of this price increase were marginal improvement in fundamentals, a recovery in market sentiment driven by favorable macroeconomic policies, and support from low PVC valuations and limited downside potential. Especially after mid-May, PVC prices surged, but downstream enterprises showed low acceptance of high-priced goods, leading to a stalemate in market transactions.

Fundamental Review

Supply Side: China's PVC production in May is estimated at 198.00 tons, a 7.46% increase month-on-month and a 6.08% increase year-on-year. Although PVC production plant maintenance remained concentrated in May, the maintenance duration was shorter than in the previous period. In addition, May had one more day than the previous month. These multiple factors combined to achieve a significant increase in PVC production in May. In terms of cumulative production, domestic PVC production from January to May is estimated at 9.7401 million tons, a year-on-year increase of 4.39%, maintaining an overall expansionary trend in supply.

On the demand side: the overall operating rate of downstream PVC industries in May is estimated at 54.74%, a year-on-year increase of 1.12%. Specifically, the operating rate of pipe and profile manufacturers remained at a relatively low level, with an average operating rate of 50.23% in May, a year-on-year decrease of 2.39%. Cable and film manufacturers fared relatively better, with operating rates generally maintained at 78.13%, a significant year-on-year increase of 26.13%. Despite frequent favorable policies in the real estate sector, downstream companies' orders did not improve accordingly, and market demand for PVC raw materials failed to increase effectively, with the recovery on the demand side falling short of expectations.

Market Forecast for Next Month

Based on currently announced maintenance schedules, the number of PVC producers undergoing maintenance in June is relatively small. Meanwhile, new capacity from Zhejiang Zhenyang and Shaanxi Jintai is scheduled to come online, making it difficult to provide significant support on the supply side. On the demand side, domestically, the destocking and inventory reduction effects brought about by policy stimulus will take time to digest. Externally, demand is constrained by shipping factors, resulting in only marginal improvement and unlikely significant growth. However, considering PVC valuation levels and the overall situation of the industry chain, the market bottom has been confirmed and is unlikely to fall back to previous lows. The price range for SG-5 PVC in the East China market in June is expected to be 6000-6300 yuan/ton.