On March 9th, the domestic PVC market experienced a strong outbreak, with the main futures contracts directly sealing off the daily limit up, and spot prices synchronously rising significantly, resulting in a significant increase in market trading activity. The core driving force focuses on the strong increase in cost and the steady recovery of demand, which resonates with the dual positive factors to promote market sentiment. However, the high inventory in the industry still poses certain constraints on price increases. According to data from SunSirs, the market price of PVC SG-5 in the East China market is in the range of 5,800-6,000 RMB/ton, with a daily increase of nearly 20%.

The sharp rise in crude oil and related raw material prices has directly driven a significant increase in PVC production costs, with different process costs showing a differentiated trend but overall strong support. The international crude oil market experienced an epic surge today, with WTI crude oil futures rising more than 30% to $118.78 per barrel and Brent crude oil futures rising more than 27% to $117.92 per barrel, both reaching new highs since June 2022. The core reason is that the escalation of geopolitical conflicts in the Middle East has led to a near halt in shipping in the Strait of Hormuz, and the global crude oil supply gap continues to widen. The sharp rise in crude oil prices has directly transmitted to the ethylene industry chain. Sinopec Huadong Branch has raised its ethylene quotation by 1,500 RMB/ton to 8,800 RMB/ton, driving up the production cost of ethylene based PVC and further strengthening market expectations for price increases.

In terms of calcium carbide method PVC, the cost support shows a relatively mild trend. On March 9th, the benchmark price of calcium carbide in SunSirs was 2,456.00 RMB/ton, a decrease of 0.65% from the beginning of this month, at the mid to low level of the year. The overall operation of the calcium carbide market was stable, and there was no additional pressure on the cost of calcium carbide PVC. However, combined with the overall price increase atmosphere driven by crude oil, the cost support of calcium carbide PVC was also strengthened, and the expectation of cost increase was significant.

In the futures market, the main PVC contract of Dalian Commodity Exchange showed strong performance, quickly rising at the opening and eventually closing at the limit up. The closing price was 5,466 RMB/ton, up 309 RMB/ton, or 5.99%, fully reflecting the market's expectation of rising costs and demand recovery.

The demand side also provides solid support for the rise of the PVC market, and the downstream operating rate continues to rise. The release of strong demand has driven the enthusiasm for procurement. The current operating rate of various downstream fields of PVC is showing a gradual recovery trend, among which the operating rate of pipe enterprises has increased to nearly 50%, an increase of nearly 10% compared to last month; The operating rate of profile enterprises has also increased, currently approaching 40%. With the arrival of the traditional peak consumption season in spring, the pace of downstream resumption of work and production is accelerating, and essential needs are gradually being released.

At the same time, external demand has also increased. Due to the cancellation of PVC export tax rebates on April 1st, the trend of foreign trade orders rushing in March continued, further supplementing the support from the demand side. In today's spot market, merchants are generally closing down and reluctant to sell, raising prices. Downstream enterprises are driven by the sentiment of price increases, and their willingness to chase orders for essential needs has increased, resulting in a significant increase in trading activity compared to the previous day.

On the supply side, the overall operating load rate of the PVC industry is currently about 80%, slightly lower than last week. Some enterprises are in maintenance status, and the marginal relief of supply pressure provides some room for price increases. However, the overall supply is still at a neutral high level and has not formed a supply shortage pattern. In terms of inventory, although the inventory ratio of enterprises has slightly decreased, social inventory is still at a high level, and high inventory is still the main limiting factor for market growth, which limits the sustained upward momentum of prices.

Overall, the strong performance of the PVC market on Monday was mainly driven by the surge in raw materials such as crude oil and ethylene on the cost side, as well as the dual support of downstream resumption of work and export rush on the demand side. In the short term, the geopolitical conflict in the Middle East is still ongoing, and the high operation of crude oil prices is expected to continue supporting the PVC cost side. If the pace of downstream demand recovery can continue, the market may maintain a strong trend; However, in the medium to long term, the fundamental factors of high inventory and supply exceeding demand in the industry have not fundamentally changed. Coupled with the possibility of a decline in cost increases, it is expected that the PVC market will show a more volatile and strong trend in the future. The sustained upward momentum is limited, and it is necessary to continue to pay attention to the trend of crude oil prices, downstream recovery progress, and inventory depletion.

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