As indicated by statistics published by relevant authority, the average market price of PVC Resin SG-5 in China was 5870RMB/Ton before September 5. But the latest average market price was already 6470RMB/Ton on September 22, 2016. In past half month, the average price of PVC Resin SG-5 is 600RMB/T higher. What are the reasons for that? Let’s check it together.
“Historically Strictest Environmental Supervision Campaign” in China
The issue of “ Environmental Supervision Campaign” can be dated back to the July. From the middle of the July to August 19, Chinese environmental supervision authorities launched a round of very strict “Environmental Supervision Campaign”. Many supervision groups were sent to eight provinces to carry out the supervision missions in Inner Mongolia, Jiangsu Province, etc.
During the Environmental Supervision Campaign, Ministry of Environment carried out strict investigations to manufacturer of limestone, which is the raw material used for calcium carbide production. At the same time, part of small-and-medium sized carbide factories were punished and dealt with.
Above-mentioned supervision campaign resulted in shutdown of some calcium carbide factories and decrease of carbide production capacity. As a result, calcium carbide on the market reduced accordingly, thus making PVC Resin SG-5 price keep going up.
The first round of “ Environmental Supervision Campaign” ended not long before. The second round of “ Environmental Supervision Campaign” will be launched in the October.
As the report published by Ministry of Environment, the second round of “ Environmental Supervision Campaign” will be carried out mainly in Shandong Province. Speaking of Shandong Province, it ranks top in the production of all kinds of chemicals. There are 8 PVC Resin manufacturers in Shandong Province, with the total productivity of 2,230,000 tons per year, accounting for 11% of the total productivity in China. Such supervision campaign will exert some effect on chlorine-alkali enterprises in this area. It will probably affect the PVC Resin market.
Adjustment in Policies and Regulations of Land Transportation
In the beginning of the September, China's Ministry of Transport published a series of new regulations to tighten the administration of land transport. From now on, overload will be strictly examined and punished in violation of relevant policies and regulations. Measures taken by shipping forwarders are as below:-
1. If the weight of goods is more than 10 tons, no LCL operation will be accepted;
2. If the weight of a 40GP is more than 25 tons, no trailer service will be provided;
3. 40HQ Container services will be suspended;
As a result, cost of land transport will increase by 20%-50%. For international trading companies, it will be a big cost.
Price of Calcium Carbide at High Level
In the beginning of 2016, the price of Calcium Carbide kept stable at a relatively low price. However, the price of Calcium Carbide has increased rapidly since the second half of July.
As the statistics, the average market price of Calcium Carbide kept stable at 2400-2580RMB/Ton in East China in July 21. But now it already goes up to 2850-3030RMB/Ton in past two month.
Low Social Inventory Stock and Supply of PVC Resin in Shortage
Statistics of Social Inventory Stock in Main Regions of China
As the statistics published by www.zhaosuliao.com, by September 18, social inventory market in main Regions of China decreased rapidly, fell 32.72% year on year and 10.22% month on month.
PVC price keep going up and trade of PVC Resin SG-5 is heating up in this week, so the social inventory stock will decline further.
In conclusion, the price of PVC Resin SG-5 will keep at a high level due to tightened environmental supervision, adjustment of regulations of land transportation and low inventory stock before the China’s National Holidays.
Extra News
As we all know, the bankruptcy of the biggest Korean logistic company--Hanjin Logistics brought big volatility to the whole international trading market. K-Line company, as a member of CKYHE League, is also stuck in deep debt crisis. As is predicted, it will not be very far that K-Line company will be purchase by some powerful financial group.
It is reported that Singapore Effissimo Foundation has already got more than 30% of stock rights of K-Line. Effissimo Foundation only held 6.2% of K-Line’s stock rights before. However, the latest information showed that stock rights of K-Line held by Effissimo Foundation has increased to 37%.
K-Line republished a financial report in June 30 and the report showed that their company suffered a loss of 26.79 billion yen (about 260.36 million USD) in the first quarter of this year. However, K-Line earned 10.19 billion yen in the first quarter of last year.
Meanwhile, K-Line announced that the total income of the first quarter was 244.59 billion yen, declined 27.% compared with the first quarter of last year. And they predicted that this financial year they will suffer a total loss of 45.5 billion yen by March 31, 2017.
“Consecutive losses of K-Line make investors and market uneasy and their businesses will have to be simplified.” said Ryota Himeno, famous analyst of Citi Group.
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