Status & Prospects for China’s PVC Industry

By An Chao, China National Chemical Economic and Technical Development Center


I. Analysis of China’s
PVC market

Polyvinyl chloride (PVC) is the plastic variety with the third largest output in the world, after polyethylene and polypropylene. It is one of the major products of the chlor-alkali industry. In recent years, China’s chlor-alkali industry has developed rapidly, and China has become the largest producer and consumer of chlor-alkali products.

1. Production

According to statistics of China Chlor-Alkali Industry Association, as of the end of 2013, the capacity for making PVC in China was 24.76 million t/a (including 1.02 million t/a of PVC paste resin). In 2013, 2.86 million t/a of new PVC capacity was put into operation and 1.51 million t/a of obsolete capacity was phased out. The output in 2013 was 15.30 million tons. China’s PVC production from 2008 to 2013 is shown in Table 1.
China’s PVC industry developed rapidly from 2003 to 2008. However, since 2008, the demand for PVC, both in China and abroad, shrank, and PVC prices declined drastically, sometimes even falling below the production cost. Meanwhile, the capacity expansion in China slowed down significantly, and operating rates have remained relatively low in recent years. Overall, China’s PVC industry faces severe problems, including overcapacity, low operating rates and an intensified market imbalance between supply and demand.
Currently, there are 93 producers in China, including enterprises which have temporary ceased production. In the past several years, the development of the industry has been highlighted by increasing industrial concentration. Now, three PVC producers here have a capacity of at least one million t/a each, and the number of PVC producers that have a capacity of at least 300 kt/a each has increased. Meanwhile, the number of PVC producers whose capacity is below 100 kt/a has decreased. Major PVC producers in China are listed in Table 2.

2. Capacity expansion

The new PVC capacity to be put into operation in 2014 is estimated to be 3.23 million t/a. These new PVC production units are scattered across China. Capacity expansion in 2014 has two characteristics. One is the increase of the proportion of PVC production units using the ethylene process. The other is the fast increase of capacity for PVC paste resin. See Figure 1 for details.

Table 1   Production of PVC in China, 2008-2013 (kt, kt/a, %)

Year    Capacity    Output    Operating rate
2008    15 810    8 820    55.8
2009    17 810    9 160    51.4
2010    20 430    11 300    55.3
2011    21 630    12 950    59.9
2012    23 410    13 180    56.3
2013    24 760    15 300    61.8
Average annual growth    9.4    11.6    -


Table 2   Major PVC producers in China, 2013 (kt/a)

Company    PVC capacity    PVC paste resin capacity
    CaC2 process    Ethylene process    
Xinjiang Zhongtai Chemical Co., Ltd.    1 500    0    0
Xinjiang Tianye (Group) Co., Ltd.    1 200    0    0
Shaanxi Beiyuan Chemical Co., Ltd.    1 100    0    0
Tianjin Dagu Chemical Co., Ltd.    100    700    0
Inner Mongolia Junzheng Chemical Co., Ltd.    640    0    0
Sinopec Qilu Company    0    600    0
Shandong Xinfa Chemical Co., Ltd.    600    0    0
Haohua Yuhang Chemical Co., Ltd.    500    0    0
Inner Mongolia Elion Chemical Industry Co., Ltd.    500    0    0
Shanghai Chlor-Alkali Chemical Co., Ltd.    0    380    100

3. Consumption

From 2008 to 2013, the consumption of PVC in China increased year-by-year. Due to the economic crisis and weak demand, consumption in China had reached a trough in 2008. In 2012, as economic growth in China slowed, the consumption of PVC increased only 1%. Domestic consumption in 2013 was 15.40 million tons. See Table 3 for details.
PVC was the first variety of plastics used to produce pipes, and it is still the most used polymer to make plastic pipes. China’s consumption structure for PVC is as follows: 71% for the production of hard products, including 32% for tubes and pipes, 29% for profiles of doors and windows, 6% for plates, etc.; the remaining 29% is used for the production of soft products. See Figure 2 for detail. In the future, the proportion of hard products is forecast to increase further. In order to meet the demand from the construction materials market, hard products will be made mainly from PVC composites and blends, while soft products will mainly include wires and cables, packaging films and wall paper.

4. Foreign trade

From 2008 to 2013, the supply of PVC in China became less reliant upon imports. However, the year 2009 was an exception. In 2009, due to a dive of oil prices, PVC producers in China using the calcium carbide process suffered major losses, and the volume of PVC imported to China increased suddenly. However, the import volume decreased afterward. Nowadays, China’s PVC industry still faces challenges such as economic uncertainty worldwide, cheap ethylene resources in the Middle East and the shale gas boom in the United States. In the future, the volume of PVC imported to China may rise, after the coal-based PVC products in China have little cost advantage over foreign products. The foreign trade of PVC powder in China from 2008 to 2013 is shown in Table 4.
Major destinations of PVC exported from China in 2013 included India, Russia, South Korea, Malaysia, Uzbekistan. The volume exported to India was largest, 180.7 kt, accounting for 27.53% of the total.
In 2013, major sources of PVC imported to China included the United States, Taiwan, Japan, South Korea and Indonesia. The volume imported from the United States was largest, 249.6 kt, worth US$237.15 million. PVC products were mainly imported through customs of Shenzhen, Huangpu and Shanghai, with Shenzhen accounting for 29.99% of the total, the largest share. Chinese enterprises took “feed processing trade” as the major way of import, 92% of the total import volume. The assembling trade accounted for 5%, and general trade accounted for 3%.

II.  Suggestions

In recent years, the rapidly developing PVC industry in China has faced a serious of challenges. The first and foremost is overcapacity. The average operating rate of China’s PVC producers has hovered at 54%-60% since 2008. Although enormous efforts have been made to save energy, reduce emissions, phase out obsolete production units and adjust the industrial structure, the overcapacity is still severe. The second challenge is low profitability, which is due to undiversified product portfolios and intensified competition in the market. The third challenge is that the industrial concentration is not high enough, and a series of M&As have has not yet been effective. Therefore, the following suggestions should be considered by the enterprises.
First, an effective mechanism to phase out obsolete production units should be established. Criteria in safety, environmental protection, energy consumption etc. should be set up, in line with the Industrial Structure Adjustment Guidance Catalogue issued by the State Development and Reform Commission of China in 2013. Central and local governments should offer benefits to enterprises that proactively shut down obsolete production units. Second, market-oriented operation and M&As between PVC produces should be encouraged in order to increase the industrial concentration. Third, energy conservation, emission reduction and environmental protection, especially the prevention of mercury pollution, should be given full attention. Lastly, the consumption in downstream industries should be expanded.                               ?