Report Industry Investment Rating - The short - term trend rating for PVC is "oscillating", with an amplitude of - 5% - + 5% [5] Report's Core View - Currently, the supply - demand situation of PVC has weakened month - on - month, but the strong policy expectations have reversed the market's overly pessimistic sentiment, driving the futures price to rise significantly. However, the price increase has not yet significantly affected the supply - demand relationship, as marginal production capacity is still in a loss state. If the futures price rises to 5300 - 5400 yuan/ton, marginal production capacity may turn profitable, and supply may increase marginally. Also, the 09 basis has reached the risk - free arbitrage level, and sufficient spot inventory and available warehouse capacity will attract more hedging positions if the price continues to rise. In the current strong commodity market sentiment, the PVC futures price may remain strong in the short term, but it is likely to fall from its high if there is no clear short - term policy implementation plan or if the overall commodity market sentiment calms down [3][18] Summary by Relevant Catalogs 6 - month - on - month Weakening of PVC Fundamentals - Since June, with the end of spring maintenance, PVC supply has increased month - on - month. As Southeast Asia and India enter the rainy season, China's PVC exports have weakened significantly in June. Since mid - June, PVC social inventory has shifted from continuous depletion since the end of February to continuous accumulation, indicating a significant month - on - month weakening of PVC fundamentals [1][8] Unclear Supply - side Policy Implementation Rules and Few Old PVC Devices - There are no official and enforceable rules for anti - involution and old device transformation policies in the PVC industry. Although some marginal PVC production capacity is in a loss state, most northwest calcium carbide - based PVC enterprises are profitable, and leading enterprises have little motivation for anti - involution. According to statistics, PVC devices with an operation time of over 20 years have a total capacity of 218 million tons per year, accounting for only 7.6% of the total capacity, and 35 million tons per year of them are in long - term shutdown. The overall PVC industry devices are relatively new due to self - initiated capacity clearance from 2013 - 2015 and the clearance of high - cost calcium carbide - based devices in recent years. The current rise in the PVC futures price is more due to sentiment rather than an actual improvement in supply - demand [2][14] Investment Advice - Fundamentally, the current supply - demand of PVC has weakened month - on - month, but strong policy expectations have reversed the market's pessimistic sentiment and pushed up the futures price. The current price increase has not significantly affected the supply - demand relationship as marginal production capacity is still in a loss state. If the futures price rises to 5300 - 5400 yuan/ton, marginal production capacity may turn profitable, and supply may increase marginally. The 09 basis has reached the risk - free arbitrage level, and sufficient spot inventory and available warehouse capacity will attract more hedging positions if the price continues to rise, which is why the number of warehouse receipts has increased rapidly recently. In the current strong commodity market sentiment, the PVC futures price may remain strong in the short term, but it is likely to fall from its high if there is no clear short - term policy implementation plan or if the overall commodity market sentiment calms down [3][18]