China slowdown – PVC edition

Further evidence points out to continued slowdown in China. The chart presents further evidence form PVC market. Chart courtesy ICIS, a global intelligence provider in chemical markets.

What is PVC?

• PVC is a key product in the property market used for fittings in windows, sanitation, cables, pipes etc.

Past trend -

• China's property market rose to peak during 2009-2010 when state provided stimulus for growth.
  
  
• China imported about 1.5 million tons of PVC at the peak of property boom during 2010.

Current scenario -

• After years of net imports in 2014, China became a net exporter of PVC that proves demand for the item is down as supply remains ample.

• Average house prices now down 10% from their peak. Developers have built up huge stock that still need to be cleared and until such prices won't be going up.

• Bankruptcies rose among property developers. Cement Shen's "Peach Blossom palace" filed for $563 million bankruptcy. Kaisa group is in talk of debt restructuring in the tune of $ 10 billion. With rise of dollar more is expected to follow suit.

• Regions across world registered fall in exports of PVC in China, despite lagging domestic production. North American exports fell to zero last year while South East Asia saw export turn to net imports last year.

Impact -

Slowdown in China, to be felt across world and property markets.

• Australia - China is largest trading partner for raw material and it seems the pain is not over with.
  
  
• New Zealand - China is a large consumer of its agricultural goods and with slowdown in Europe the situation gets far worse.
  
  
• Switzerland - Shrinkage in China's luxury market will be a continuing headache for exporters.
  
  
• Markets across Asia and North America won't be pared too as many companies are net exporter to the market.
  
  
• S&P 500 stocks like Coca Cola, Google, Apple, McDonald earns large revenue from china and with slow down pressure will be on their earnings.