In 2023, the PVC market has been in a long-term pattern of weak reality and strong policy expectations, with the main focus on a pulse like upward trend in exports. How will the demand side of PVC in 2024 be interpreted, and can it once again become the main trading logic in the market?
Exports will serve as a cushion
According to relevant data, from January to October 2023, China's cumulative export of PVC powder reached 1.9076 million tons, an increase of 8.7 percentage points compared to the same period in 2022. It is expected that the annual export growth rate will reach 13%. From January to October 2023, China exported 9.366 million tons of PVC to India, accounting for 49.1% of the total export share. The import volume of PVC from India increased by 68% compared to the same period last year. Against the backdrop of real estate, infrastructure, and forced manufacturing, India's demand for PVC continues to grow, and it is expected to maintain a high level of imports in 2024.
At present, the urbanization rate in India is relatively low, and the potential for improvement in the demand for housing market is enormous. In addition, India is currently vigorously developing infrastructure projects, promoting urban water network construction, and rural farmland irrigation. These are the main consumption areas of PVC, which are conducive to the release of PVC exports in China in the medium and long term. Considering the seasonal characteristics of traditional demand in India, bottom buying of PVC often occurs in the fourth quarter, but there was no significant increase in transaction volume in the fourth quarter of this year, despite the current low consolidation of PVC Indian CFR (cost+freight) at $750/ton. Compared to the excessive seasonal bottom hunting and replenishment sentiment at the end of 2022, which led to the excessive seasonal increase in PVC consumption at the beginning of 2023, there seems to be no sign of continuing the "prosperity" of last year in the fourth quarter of this year.
Compared to the strong growth in demand for PVC in the Indian market in 2023, the situation in the European and American markets is much bleak. From January to October 2023, China's cumulative export volume of PVC to Europe and America was 3.7358 million tons, a decrease of 621700 tons or 14.27% compared to the same period last year. The European economy continues to be weak, with high inventory and supply combined with weak demand, leading to a gradual decline in the digestion capacity of PVC in the European and American markets.
Overall, the rapid development of the Indian economy can still bring certain optimistic expectations for China's PVC exports in 2024, and under the stimulation of low prices, Indian traders may delay restocking compared to previous years. In the future, it is necessary to continue to pay attention to India's consumption situation. It is expected that the overall export growth rate will slow down in 2024, and monthly export fluctuations will narrow. However, unlike the price ceiling determined by exports in 2023, the export situation in 2024 will play a certain role in supporting domestic prices.
Weakened real estate support
In November 2023, the cumulative year-on-year investment, new construction, construction, and completion of China's real estate development were -9.4%, -21.2%, -7.2%, and 17.9%, respectively. Although the completion data showed good performance, the overall demand for PVC began to be used from the middle stage of real estate construction. The growth rate of strong completion is mainly due to the "guaranteed delivery of buildings" policy since last year. As the demand for PVC in the three cycles of new construction, construction, and completion is basically equal, overall, there is still a certain drag on domestic demand for PVC in the real estate sector this year. As for whether the completed end in 2024 can still provide some support for PVC demand, there is greater uncertainty compared to the newly started and construction ends, because according to a transmission cycle of about 3 years, there is greater pressure on the data decline of the completed end in the second half of 2024.
It is expected that there will still be a series of policies to boost the real estate market in China in 2024. From the policy perspective, there is a certain bullish expectation for PVC demand. However, the improvement in actual construction and construction data still depends on the leading indicator of sales area.
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