Shanghai (China): This week, the market participants in both China and Indonesia reported their Polyvinyl Alcohol (PVA) markets experienced a surprising downturn. The Chinese PVA market faced a peculiar situation. Despite manufacturers maintaining stable pricing, demand remained stagnant, leading to a buildup of inventory. This problem is expected to worsen during the upcoming off-season, when key consumers like polyester short fibre factories traditionally reduce their purchases. Adding to the pressure, refinery maintenance in Shandong province further restricted market supply and exerted downward pressure on raw material costs.

Indonesia's PVA market mirrored China's challenges. Subdued buying activity downstream resulted in high inventory levels, despite a positive, albeit slightly declining, Manufacturing PMI for the 32nd consecutive month. Export orders also witnessed a significant decline, marking their sharpest drop since February 2023. Rising input costs driven by higher raw material prices and an unfavourable exchange rate further exacerbated the situation. This confluence of factors led to a four-year low in market sentiment, reflecting growing anxiety.

Beyond domestic factors, the global market faced headwinds from geopolitical tensions and economic challenges in Europe. This dampened purchasing power and impacted demand for PVA applications like home textile imports. China's spandex industry, another major PVA consumer, grappled with its own set of problems. Declining sales amidst capacity expansion and a lack of sufficient feedstock support further contributed to the overall market weakness. A temporary surge in buying activity at lower PVA prices offered a moment of optimism. However, this enthusiasm quickly dissipated as cautious sentiment, particularly prevalent in the textile sector, regained dominance.

The PVA market in both China and Indonesia presented a paradoxical situation – growth in manufacturing activity decoupled from demand, leading to a decline in PVA prices. Weak demand and external pressures are likely to continue impacting the market in the coming months. The upcoming off-season and ongoing challenges pose significant risks to market stability, requiring close monitoring by industry stakeholders.

China's PVA market faces stagnant demand despite stable pricing, leading to inventory buildup. This situation is likely to worsen during the off-season when major consumers typically reduce purchases. Refinery maintenance in Shandong province further complicates matters by restricting supply and impacting raw material costs. Indonesia mirrors China's challenges. Subdued downstream buying activity and a significant decline in export orders have resulted in high inventory levels. Rising input costs due to higher raw material prices and an unfavourable exchange rate add pressure, leading to a four-year low in market sentiment. Beyond domestic concerns, global headwinds from geopolitical tensions and economic challenges in Europe weaken purchasing power and impact PVA demand. China's spandex industry, a major PVA consumer, faces declining sales amidst capacity expansion and feedstock limitations, further contributing to market weakness in the short term.