There is uncertainty in the release of PVC production capacity The downstream flooring products market has great potential

Financial Associated Press (Hangzhou, reporter Chen Kang) news, under the attack of multiple factors, the PVC (polyvinyl chloride) industry in 2021 experienced a "big opening and closing", and the sharp price fluctuations have also caused the "busyness" of downstream manufacturers. A number of industry insiders told the Financial Associated Press reporter that the huge price change is the main reason for inhibiting downstream profits and demand, and this year's market volatility will be relatively "not so large", but there are still more uncertainties in supply and demand.

Zhang Jun, head of the energy and chemical team of the Zhongda Futures Research Institute, told the Financial Associated Press that the price of PVC after the holiday is still expected to rise, on the one hand, the price increase of crude oil and coal will push up the price of PVC raw materials, and the cost end support is strong, on the other hand, this round of monetary easing policy will have a certain pulling effect on the real estate industry downstream of PVC. The current PVC futures price is in the lead of expectations, and the price has risen slightly.

Jiang Wenji, director of the research and investment department of Zhejiang Xuande Supply Chain Management Co., Ltd., told the Financial Associated Press that the downstream enterprises of the PVC industry chain were "difficult to survive" last year, and the low-end, small and scattered production capacity was facing elimination, and the future development in the direction of high quality; and the field of PVC downstream products has also undergone new changes in recent years, "PVC flooring will be a better track in the future." ”

Huge price fluctuations inhibit downstream profits

When the price of PVC soared, the profits of the industrial chain were concentrated upstream, and some of the PVC manufacturers who purchased calcium carbide were close to losses, and the pressure on PVC products enterprises was also very large. Conch profile (000619. SZ) announced on January 11 that the company had a pre-loss of 120 million to 140 million yuan in 2021 due to rising raw material costs.

"Last year, pipe companies were the most injured, the upstream was under cost pressure, and the shortage of funds in the downstream real estate industry led to sluggish demand," Jiang Wenji said, PVC prices change too fast, the downstream does not rise in price rhythm, bargaining power is low, resulting in a reduction in the number of orders, and some enterprises have also reduced production loads.

A Weixing shares (002003. SZ) dealers also told the Financial Associated Press reporter that the sales price of pipes and profiles is difficult to keep up with the increase in raw materials, "Last year, the factory price of upstream manufacturers was raised several times, the increase was more than 30%, as a dealer can only earn a little less, we can not go down so much, and the price increase is too fast, customers do not understand." ”

The above dealers mentioned that in previous years, downstream enterprises would have an inventory of about a month, but now the market is unstable, basically with the use of buy, "after the year, the factory price should have a wave of rise." ”

"The reason why downstream enterprises can hold on to last year's lubrication slope is because they have made good profits in the past few years, especially when the price of PVC is low and there is excess capacity," Jiang Wenji said, "In recent years, the industry will be in a painful period of transformation, small-capacity factories will be gradually eliminated, orders will gradually shift to medium and large factories, and the industry will get rid of the past 'winning by quantity' and improve quality." ”

The new production capacity is growing at a low rate

Last year's surge in PVC prices was largely affected by the shortage of calcium carbide supply under the dual control policy, and the production capacity of PVC upstream calcium carbide in the past five years has decreased year by year, and the current annual production capacity is 24.52 million tons.

The Financial Associated Press reporter learned that the restriction of raw material calcium carbide will continue to disturb the start of PVC and the release of production capacity. According to the statistics of Cinda Futures, in recent years, PVC devices have been postponed and put into production, and only 520,000 tons of new production capacity is planned to be added to the end of 2021; the new production capacity of PVC powder in 2022 is 2.15 million tons, considering the uncertainty of the production of some devices, the actual landing capacity is expected to be 950,000 tons, and the production capacity growth rate is 3.5%. CITIC Futures expects PVC to have a production capacity of no more than 1.2 million tons this year, with a capacity growth rate of less than 4.5%.

Among the above production capacity, the calcium carbide method includes 400,000 tons of Shandong Xinfa and 600,000 tons of Shaanxi Jintai; the ethylene method includes 150,000 tons of Qingdao Bay, 400,000 tons of Julong Chemical, and 400,000 tons of production capacity of Guangxi Huayi.

On the demand side, a building materials industry analyst told the Financial Associated Press reporter that PVC has been facing the concern that some pipe demand is replaced by PE and PP, but under last year's high price, only a few PVC membranes were replaced by PE, and there will be no new substitution between various pipes. He mentioned that PVC is irreplaceable in physical properties, pvc pipe is more suitable for outdoor use than PE pipe, and durability is strong.

In this case, the industry believes that the market demand for PVC is stable, and the weak real estate market in 2022 needs to be improved, which means that PVC will not face the risk of a cliff-like decline in demand, ensuring that there will be no obvious imbalance between supply and demand under low supply growth.

The PVC flooring market has a lot of room for growth

PVC direct downstream industry can be divided into two categories: hard products and soft products, subdivided, including pipes / pipe fittings, profiles / doors and windows, floors / wall panels and other plates, films and other products.

"The main use of PVC has undergone some changes in recent years, the use of pipes is relatively stable, and the proportion of profiles used in the past five years has been declining, many have been replaced by aluminum alloys, PVC flooring due to the export demand in North America is very large, the proportion of use has been increasing." Jiang Wenji mentioned that PVC flooring still belongs to the emerging category in China, and the future market still has great potential.

According to the data of Zhuo Chuang Information, from 2016 to 2021, the proportion of pipes/pipe fittings used in PVC downstream products is still the highest, at 35%, while the proportion of profiles/doors and windows and floors/wall panels has dropped by one liter, the profiles/doors and windows have dropped from 28% all the way to 13%, and the floor/wall panels have risen from 3% to 14%.

In recent years, PVC flooring has become popular in the North American decoration market with its performance of formaldehyde-free, fireproof and flame retardant, waterproof and non-slip, easy to install and disassemble, etc. According to customs data, from January to October 2021, the cumulative export of PVC flooring in the mainland was 4.724 million tons, an increase of 20.14% year-on-year. In 2020, 80% of the $3.954 billion imports of PVC flooring in the United States came from China.

Listed companies in the PVC flooring industry, Walrus New Materials (003011.SZ), Ari Home (603221. SH), in the past two years are actively expanding production capacity, of which the walrus new material investment project annual output of 20 million square meters PVC flooring production base will be completed this year, Vietnam Haixin second factory phase I project design capacity of 7 million square meters, is gradually released. In addition, 002206. SZ) after the establishment of a wholly-owned subsidiary Zhejiang Hailide Flooring Co., Ltd., in the European and American markets to expand investment, the annual output of 12 million square meters of stone plastic flooring (PVC sheet flooring) project to be put into production.