Introduction
Recently, as the geopolitical risk premium has subsided, the prices of upstream raw materials VCM and PVC paste resin have both experienced a rational decline from their high points of the year. However, the market's expectation of "exchanging price for quantity" did not materialize as scheduled. The reason behind this is that the prices of plasticizers for related products continue to remain high, and some downstream orders are insufficient, causing downstream product companies to remain cautious and the paste resin market to fall into a situation of "cost reduction and weak demand".
Cost side 'decompression' VCM and paste resin prices fall back from high levels
As of early May, the listing price of upstream raw material VCM has fallen by nearly 15% from its previous high point, while the domestic PVC paste resin market price has also experienced a decline of 1200-1300 yuan/ton.
From the data, the price of micro suspended float glass glove material in the East China market has fallen from the daily average high point of 8350 yuan/ton in March to the current average price of 7150 yuan/ton; The price of seed lotion method bulk material also fell from the average price of 7700 yuan/ton to around 6400 yuan/ton. In theory, the decline in raw material prices should help alleviate downstream cost pressures and stimulate the release of procurement demand, but this is not the case.
The blockage point still has plasticizers running at a high level
Although the price of paste resin itself has rebounded, the price trend of its supporting materials - plasticizers (mainly DOP and DOTP) is completely opposite and still remains strong.
1. Reasons for high prices of plasticizers:
The core raw material of plasticizers, octanol, has been at a high price for only two years due to the impact of reduced domestic supply. Driven by this, the market prices of DOP and DOTP remain high, and the adjustment range is much smaller than that of paste resin. At present, the market price of DOP is still operating at around 9600-10000 yuan/ton, which is relatively high in recent years.
2. The cumulative effect on downstream
For downstream product enterprises of PVC paste resin (such as synthetic leather, coated cloth, wallpaper, etc.), the ratio of paste resin to plasticizer in the production formula is usually 1:0.6 to 1:1. This means that plasticizer costs account for a significant weight in the composition of raw material costs.
The price reduction of polyvinyl chloride paste resin has only partially alleviated the cost pressure, while the high price stalemate of plasticizers means that the total raw material cost of downstream enterprises is still high. In the difficult situation of raising prices for terminal products, the marginal profit of the enterprise has not been effectively repaired.
3. High level operation of plasticizers does not reduce downstream cost pressure
Downstream products of PVC paste resin (such as synthetic leather, gloves, coated fabrics, etc.) require the addition of a large amount of plasticizers in the production process to improve processing performance, and the two are closely linked at the cost end.
At present, the price of octanol in the upstream of the plasticizer industry chain remains high, directly pushing up the market prices of major plasticizer varieties such as DOP and DOTP. The sustained strength of plasticizer prices means that downstream product companies not only face high priced resin paste, but also have to bear equally high auxiliary material costs. This "double high" situation has led to a significant increase in the comprehensive production costs of terminal product enterprises, severely squeezing their profit margins.
4. Strong downstream wait-and-see sentiment hinders high price transmission
Firstly, in terms of orders, apart from some export-oriented glove manufacturers maintaining stable production, the larger proportion of new orders in the large sheet material fields such as synthetic leather and toys is insufficient, and enterprises lack the motivation to increase raw material procurement. Secondly, in terms of cost transmission, it is difficult for terminal products to raise prices, and downstream enterprises find it difficult to transmit the pressure of raw material price increases downstream. They can only cope by reducing procurement volume and digesting previous inventory. Some small and medium-sized enterprises even choose to reduce production load.
Market Contradiction Focus and Future Attention
In the short term, the paste resin market is currently in a weak downstream demand stage.
Focus 1: Trend of plasticizers. As a downstream supporting raw material, the price changes of plasticizers directly affect the affordability of end enterprises. If the price of plasticizers continues to remain high, downstream resistance will be difficult to alleviate, thereby suppressing the demand for purchasing paste resins.
Focus 2: Large scale material replenishment node. With the gradual depletion of low-priced inventory in the early stage, downstream enterprises do not rule out the possibility of periodic replenishment of essential needs, which may bring a brief opportunity for transaction recovery to the market, but the expected strength is limited.
Overall, although the market price of paste resin has experienced a significant decline, the downstream wait-and-see sentiment is difficult to dissipate in the short term against the backdrop of unchanged plasticizer prices and sluggish terminal demand. The rebound in transactions needs to wait for substantial improvement in terminal orders or a significant decline in raw material costs.
Focus 1: Trend of plasticizers. As a downstream supporting raw material, the price changes of plasticizers directly affect the affordability of end enterprises. If the price of plasticizers continues to remain high, downstream resistance will be difficult to alleviate, thereby suppressing the demand for purchasing paste resins.
Focus 2: Large scale material replenishment node. With the gradual depletion of low-priced inventory in the early stage, downstream enterprises do not rule out the possibility of periodic replenishment of essential needs, which may bring a brief opportunity for transaction recovery to the market, but the expected strength is limited.
Overall, although the market price of paste resin has experienced a significant decline, the downstream wait-and-see sentiment is difficult to dissipate in the short term against the backdrop of unchanged plasticizer prices and sluggish terminal demand. The rebound in transactions needs to wait for substantial improvement in terminal orders or a significant decline in raw material costs.