Improved Operation of the Chlor-Alkali Industry in China for H1

China Chlor-Alkali Industry Association

The overall economic functioning of the chlor-alkali industry in China was improved, and the efficiency of enterprises was upgraded in the first half of 2016, compared with the same period of last year.
The capacity of caustic soda in China reached 38.99 million t/a at the end of June, a net increase of 260 kt/a (750 kt/a being added and 490 kt/a being shut down) over the capacity at the end of 2015. The capacity of caustic soda using the ion membrane process is 38.58 million t/a today, accounting for around 99% of the total. There are 162 caustic soda producers in China.
The capacity of PVC in China was 23.33 million t/a in the first half of 2016, a net drop of 150 kt/a (170 kt/a being added and 320 kt/a being eliminated) from the capacity at the end of 2015. The capacity of PVC using the calcium carbide process is 18.81 million t/a today, accounting for around 80.6% of the total. There are 80 PVC producers in China. See Table 1 for details.
China’s output of caustic soda during January-June 2016 was 16.19 million tons, an increase of 6.4% over the same period of last year, according to data from the National Bureau of Statistics. The total output of PVC was 8.29 million tons, an increase of 2.1%. The average operating rate of caustic soda is 82% and the average operating rate of PVC is 70% today. The operating rate of enterprises located in the western region is higher than the operating rate of enterprises located in central and eastern regions. See Table 2 for details.

Table 1    Chlor-Alkali capacity in China

    Caustic soda capacity (kt/a)    Number of enterprises    PVC capacity
(kt/a)    Number of enterprises
End of 2015    38 730    163    23 480    81
End of June 2016    38 990    162    23 330    80


Table 2    Output of caustic soda and PVC, January-June 2016  (kt)

    January-February    March    April    May    June    Total
Caustic soda     4 807    2 855     2 760    2 803     2 821    16 185
PVC    2 631    1 428     1 321     1 383     1 376    8 287


Table 3  Export of liquid caustic soda and solid caustic soda in China    (kt)

    January    February    March    April    May    June    Total    Growth
Liquid caustic soda    79.2    41.9    49.6    95.6    58.5    192.8    517.7    -15.6%
Solid caustic soda     69.7    54    96.5    84.0    75    63.4    442.6    20.4%


Table 4  Import and export of PVC in China   (kt)

    January     February    March    April    May    June    Total     Growth
Import volume       62.2    36.4    59.7    50.3    53.5    55.9    317.9    -18.4%
Export volume    52.7     52.4    123.5    137.0    103.9    101.0    570.4    46.41%


Market: basic stabilty for caustic soda, rise for PVC

The overall market of liquid caustic soda in China was quite weak in the first quarter. Regional price trends differed in the second quarter. In North China, with backing from the alumina market, the prices of liquid caustic soda increased. In East China and South China, sales were slow overall. The market for solid caustic soda in China was quite firm in the first half of the year. As demand is flat, rising prices are not likely. See Figure 1 for details.
The PVC market in China increased steadily in the first quarter and prices were firm. Traders reduced inventory reserves in April, producers felt greater sales pressure and prices fell. Despite much overhaul of chlor-alkali units in China, demand was slack in May, and mainstream prices came down. The PVC market fluctuated considerably in June. In early- and mid-June the PVC market continued the trend of May and declined a bit. With the constant drastic price rise of PVC futures, the price of PVC using the calcium carbide process increased RMB300-400/t in late June. See Figure 2 for details.

Export: shrinkage for caustic soda, drastic increase for PVC

The export volume of liquid caustic soda in China was 517.7 kt during January-June 2016 and the export volume of solid caustic soda was 442.6 kt. The total export volume was 960 kt, a drop of 81 kt from the same period of last year. See Table 3 for details.
The total import volume of PVC in China was 317.9 kt during January-June 2016, a drop of 18.4% from the same period of last year. The total export volume of PVC was 570.4 kt, an increase of 46% over the same period of last year. The export volume increased drastically in the first half of the year mainly because of increased demand in India and Southeast Asia. The top five export destinations were India, Malaysia, Thailand, Vietnam and Russia. Uzbekistan, Myanmar and Kazakhstan followed behind. See Table 4 for details.

Future market

The planned new capacity of caustic soda for the second half of 2016 is 2.72 million t/a. Although the completion of some units will likely be postponed, new capacity of around 1.00 million t/a is expected to be released. The output of caustic soda will therefore stay relatively high in the second half of the year.  
The planned new capacity of PVC for the second half of 2016 is 2.28 million t/a. Based on estimates made according to the empirical operating rate, a new capacity of 1.00 million t/a will likely be released. In the third quarter, the market of PVC is expected to continue the strong trend seen in the middle of the year. In the fourth quarter, the usual slack season, the market will likely be flat.