Quarterly Analysis - PC: Supply and Demand Conflicts Intensify, Market Runs at the Bottom in the First Quarter

[Introduction] In the first quarter of 2025, the PC market experienced price fluctuations due to supply and demand dynamics. Industry operating rates were close to 80%, leading to ample market supply, while downstream demand recovery fell short of expectations. Coupled with weak cost support, multiple factors negatively impacted the PC market. In the second quarter, the PC market is expected to remain in a state of supply and demand contention, with relatively small market fluctuations.

In the first quarter of 2025, the domestic PC market showed a high-level downward trend. Taking Huadong Lihua Yi 111BR as an example, the average market price in the first quarter was 12,396 yuan/ton, a decrease of 3.28% compared to the previous quarter and a decrease of 10.02% year-on-year. The market high during the quarter was on January 17, reaching 12,600 yuan/ton, while the low occurred on March 24, at 12,100 yuan/ton, resulting in a fluctuation of 500 yuan/ton. Throughout the quarter, the market faced supply pressure, negatively impacting market sentiment and leading to an overall decline. At the beginning of the quarter, prices showed an upward trend, primarily due to increased pre-Spring Festival stocking by downstream buyers in early to mid-January, coupled with an improvement in the external environment, which made sellers cautious about reducing prices, leading to slight increases in some source prices. However, downstream demand was weaker than expected, and the decline in bisphenol A prices also negatively affected the PC market, resulting in an overall downward trend in February and March. By mid to late March, some source prices had dropped to their lowest levels in nearly five years.

The long-term supply exceeds demand in the market, which is a negative factor for the industry's sentiment.

In the first quarter of 2025, the estimated total supply of the domestic PC market increased by 17,000 tons compared to the fourth quarter of 2024, a quarter-on-quarter increase of 1.67%, indicating a relatively ample market supply. The operating load rate of the domestic PC industry in the first quarter was at 79.5%, with the rate in March nearly reaching 83%, a historical high. During the quarter, there were fewer maintenance shutdowns; polycarbonate plants of Yanhua gradually restarted from late January, and the Hainan Huasheng plant began to ramp up production in mid-February, while plants from Lihua Yih, Luxi, Tianhua, and others experienced short-term reductions in load, with most other plants operating stably. From the perspective of downstream demand, late January marked the Spring Festival, and some downstream sectors stocked up in early to mid-January, but the purchase volume was lower than in previous years. From mid-February, downstream demand gradually returned to the market, and in March, it began to recover, although not reaching the performance typical of past traditional peak seasons. Throughout the quarter, some large and medium-sized modified material factories performed well in terms of orders, with individual factories scheduled to produce into the second quarter, while most small factories saw poor order performance, operating at 0-60% capacity and mainly meeting just essential demand. The contradiction between supply and demand continued to exist throughout the quarter, with factory operations remaining at a high level, while most traders maintained slightly high inventory levels, leading to a bearish effect on the market and a continuous decline in the focus of PC negotiations.

The decline in costs poses a negative impact on the PC market.

In the first quarter, the bisphenol A market showed an overall downward trend from a high level. The closing price for bisphenol A in East China ranged from 9,000 to 9,025 yuan/ton, with an average market price of 9,350 yuan/ton for the quarter, reflecting a year-on-year decline of 1.98% and a slight quarter-on-quarter decrease of 0.05%. During the first quarter, the bisphenol A market experienced a tug-of-war between supply and demand, with overall industry operating rates maintained at over 70%. Meanwhile, the downstream markets for PC (polycarbonate) and epoxy resin gradually weakened, with just-in-time demand supporting the market, leading to a slight downturn in the trading focus of the bisphenol A market, which negatively impacted the PC market. The decline in the bisphenol A market created cost pressure on the PC market, and recently, the profitability levels in the PC market have not been optimistic. For instance, the theoretical gross profit margin for a mainstream grade of PC in East China was overall at a loss level. By late March, PC factories became increasingly cautious in their willingness to lower prices, and as bisphenol A prices decreased, the profit margin for PC gradually recovered by around 100 yuan/ton.

Outlook: The market may experience a low-level correction in the second quarter before entering a period of stagnation.

It is expected that in the second quarter, the domestic PC market may experience a narrow rebound followed by slight fluctuations, with limited market ups and downs. The main factors influencing market fluctuations continue to be supply and demand, with raw materials continuing to play a cost-supporting role. In terms of supply, several plants, including those of Zhongsha Tianjin, Pingmei Shenma, Luxi Chemical, Lihua Yi, and Mitsubishi Gas, have scheduled maintenance plans in the second quarter. Many intermediaries are holding inventory, and the market is expected to primarily digest existing stocks, leading to relatively ample market supply. April is expected to see a higher number of plant maintenance activities, with the PC industry's operating rate anticipated to decline to around 78%, a decrease of 5 percentage points from this month. As market supply diminishes, it is expected that sellers may hold a firm price expectation, and the PC market is likely to experience a low-level adjustment. On the demand side, some large factories have relatively ideal orders, while orders from some small and medium-sized factories are slightly weaker. It is anticipated that downstream demand will not improve significantly and may continue to follow just-in-demand trends.

From the cost side, it is expected that the supply of bisphenol A will be relatively ample in the second quarter, while downstream demand may recover slowly, leaving supply-demand contradictions to be resolved. Attention should be paid to the price adjustments by sellers. It is anticipated that the bisphenol A market will remain under pressure in the second quarter, with a potential trend of correction in the latter part of the quarter. The overall price fluctuation is expected to be limited, with an average monthly price running between 8,900 and 9,100 yuan/ton, which will have a limited impact on the PC market.

Overall, the PC market will still be in a situation of supply and demand competition, coupled with gross margins hovering around the breakeven point. It is expected that in the second quarter, the price of domestic sources in East China will range between 12,100 and 13,000 yuan/ton, with attention on downstream demand performance.