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High oil prices drive polyvinyl chloride (PVC) prices up


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Source:www.muchid.com               Date:2022.5.19


Recently, concerns about supply risks brought about by the situation in Russia and Ukraine continued, and international oil prices continued to rise, causing the price of polyvinyl chloride (PVC) to rise along with the price of crude oil. In the later period, the domestic PVC demand gradually recovered to the peak season level, and the external market demand improved, and PVC will welcome the price rise.
As of March 17, the 04 contract of NYMEX crude oil futures closed at $102.98/barrel, up $7.94/barrel; the 05 contract of ICE oil futures closed at $106.64/barrel, up $8.62/barrel. The surge in crude oil is good for the PVC market, and there will be a two-stage rise in the subsequent PVC market. One is the passive rise based on the logic of rising costs; the other is the continuous improvement in spot supply and demand, which drives the continuous strengthening of the active rise.
         80% of the domestic PVC production capacity adopts the calcium carbide method. However, overseas PVC all use the ethylene method, so PVC, as one of the chemical products, has a linkage effect with crude oil. When crude oil rises sharply, PVC rises with crude oil prices. However, at present, the PVC inventory is relatively high, and the spot pressure is relatively large. The negative feedback from the demand side will make it difficult for PVC prices to keep up with crude oil. The rise of PVC at this stage is a passive rise based on rising costs, so the impact on PVC is relatively limited.
         Ethylene-made PVC is conducted through the industrial chain of crude oil - naphtha - ethylene - polyethylene - PVC. It takes about 0.5 tons of ethylene to produce 1 ton of PVC, so the international crude oil price has a great influence on the price trend of PVC. If crude oil continues to rise, there will be a reduction in overseas PVC supply. One is the reduction in supply caused by the compressed production profit. At present, overseas refineries still use crude oil before the price increase. When high-priced crude oil is used in April to May, the profit of PVC production will be greatly compressed, and enterprises will choose to reduce production load to avoid operational risks. The second is the supply reduction caused by the shortage of raw materials, because about one-third of the world's oil and gas depends on Russia's supply. Europe has a PVC production capacity of about 8 million tons per year, accounting for about 15% of the world. Due to the characteristics of oil and gas pipeline transmission, if Russian crude oil is not used, it is very difficult to replace raw materials or divert crude oil immediately, which will cause PVC production to be unable to meet the current operating load due to shortage of raw materials.
        The trend of PVC depends more on its own supply and demand. Once there is a substantial reduction in PVC supply overseas, it will trigger a rapid increase in domestic PVC exports, which will exacerbate the low growth rate of domestic PVC supply and further decline.

Tag: PVC
 
Oil prices
 
Calcium carbide method
 
Ethylene method
 
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