Weak Supply and Demand Combined with High Inventory Pressure Keep China PVC Market Volatile and Bearish

I. Futures Market (DCE V2609 Main Contract)

The market's center of gravity shifted downward throughout the week, with continuous declines from Monday to Thursday. It closed at 4,521 RMB/tonne on June 18, having ranged from a high of 4,691 to a low of 4,486, resulting in a cumulative weekly drop of over 170 RMB. The main contract maintained a net short position; long positions were continuously reduced while short positions dominated. Inter-month spreads weakened, and the premium of far-month contracts over near-month contracts narrowed.

II. Spot Market

East China Benchmark: Carbide-process SG-5 grade PVC was quoted at 4,520–4,630 RMB/tonne, down 80–120 RMB/tonne week-on-week. According to the SunSirs commodity analysis system, the weekly decline to East China carbide-process SG-5 was 2.84%. Traders offered price concessions to move stock, while downstream buyers limited purchases to small volumes to immediate needs rather than bulk stocking. Trading was sluggish. Spot prices held a slight premium over futures, with a basis of 30–60 RMB/tonne.

III. Factor Analysis

Supply Side: Operating rates rose slightly; maintenance-related output losses were limited; supply pressure increased marginally.

Last week, the overall PVC capacity utilization rate approached 70%, a slight increase from the previous week. Operating rates at Northwest carbide-process vegetation rose slightly as a few previously idled units restarted sporadically. The operating rate to ethylene-process PVC remained low at around 50%. Several maintenance units in coastal areas gradually resumed operations, and ethylene-process operating rates stabilized without further decline, though they remained at historical lows. Raw Material Costs: Calcium carbide costs provide slight support

Calcium Carbide: Prevailing prices in Northwest China hover around 2,400 RMB/tonne, marking a weekly increase of 100 RMB. While losses to calcium carbide-based production have narrowed somewhat, the sector as a whole remains in the red. According to the SunSirs commodity analysis system, prices rebounded mid-week, showing a total weekly rise of 0.87%.

Ethylene: International ethylene prices ranged from $1,140 to $1,150 per tonne this week. Weakening crude oil prices drove down costs to ethylene-based production, further squeezing profit margins. Overall, cost dynamics show a "supported floor however weak ceiling," with the possible to a sharp decline limited by raw material costs.

Demand Side: Weak domestic and foreign demand; market enters off-season

Operating rates to domestic downstream items declined across the board this week, remaining generally low at around 40%—significantly below historical levels to this period. The sluggish real estate sector has impacted areas such as profiles and piping. Additionally, the door, window, and home renovation sectors have slowed, further dampening upstream PVC demand. End-market distributors are focusing on destocking and have generally slowed their raw material procurement.

Export data is also lackluster. With India's zero-tariff exemption expiring on June 30 and the anticipated reinstatement of a 7.5% import tariff, export performance has declined; overseas buyers are generally adopting a wait-and-see approach, with a notable drop in orders from India.

IV. Market Outlook

According to SunSirs PVC analysts, maintenance activities on the supply side will gradually slow in the short term, leading to expectations of increased output. However, weak domestic downstream demand will create a tug-of-war, with bearish and bullish factors partially offsetting each other. Inventory remains a critical factor; weak demand continues to drive stock accumulation. Overall, the pattern of weak supply and demand is expected to persist next week, with the market likely to see narrow, slightly bearish fluctuations.