Zheng Jiebin, CCAIA
China’s chlor-alkali industry has been on a stable development track in the first half of 2021, with increasing industry concentration rate and technical level. Chlor-alkali prices hovered at low levels, while polyvinyl chloride (PVC) prices stayed high, which slightly improved the imbalance of the industrial chain. Strict safety and environmental protection inspections are still in place. The chlor-alkali industry is facing numerous challenges.
Characteristics of the Industry Economic Operation in H1 2021
1. Capacity Sustains Reasonable Growth, Average Enterprise Scale Enlarges Further
There were 160 chlor-alkali enterprises in China in the first half of 2021, with capacities totalling 45 200 kt/a, including 500 kt/a capacity additions. There were 70 domestic PVC companies over the period and their capacities totalled 26 700 kt/a, including 60 kt/a new capacities.
Average capacity of chlor-alkali producers increased to the current 280 kt/a from 220 kt/a in 2013, while that of PVC producers rose to 380 kt/a from 270 kt/a in 2013. The average enterprise scale expanded further.
Table 1 and Table 2 show detailed supply-demand situations of China’s chlor-alkali and PVC industries in 2010-2021.
2. Main Products Producers Keep High Operating Rates
The average plant run rate of the domestic chlor-alkali and PVC industry was 85% and 82%, respectively in January-June 2021, both up by four percentage points year on year.
3. Chlor-alkali Prices Hover at Low Levels, PVC Prices Stay High
Domestic chlor-alkali prices generally fluctuated at low levels in the first half of 2021, with the average prices in early July up by 4% from the early January level.
The domestic PVC market was active and witnessed wide price fluctuations. The overall price levels stayed high, on the back of tight domestic calcium carbide supply and lingering supply shortage of PVC in the international market. Average domestic calcium carbide-based PVC prices rose by 27% in early July from early January.
The cold snap hit the US in mid/late February, which greatly impacted the world PVC supply pattern. A large number of consuming markets, which used to rely on the US cargoes shifted to source from China. Increasing exports of PVC powder from China in the first half of 2021 played a major part in regulating the domestic supply-demand situation and cementing market confidence. Figure 1 and Figure 2 show China’s 32% ion-membrane caustic soda and PVC prices in 2020-June 2021.
Figure 1 Prices of 32% Ion-Membrane Caustic Soda (RMB/t)
Figure 2 PVC Prices (RMB/t)
4. More Caustic Soda Exports, Large Increases in PVC Exports
China exported 651 kt of caustic soda in January-June 2021, up by 36.7% from the same period of 2020 at 476.2 kt. Of these, solid caustic soda exports were 227 kt, down by 27% year on year, while liquid exports were 423 kt, up by 160% year on year. Table 3 shows China’s caustic soda exports in the first half of 2021.
China imported 171 kt of PVC powder in January-June 2021, down by 62.2% year on year and exported 1 102 kt of PVC over the same period, up by 348% year on year.
5. Some Downstream Products Post Higher Output
Domestic alumina output reached 39 281 kt in January-June 2021, up by 11% year on year and plastic products output totalled 38 835 kt, up by 18.2% year on year. Table 5 shows the output of some chlor-alkali downstream products in the first half of 2021.
Outlook for H2 2021
China’s caustic soda market is still affected by multiple factors, which may intensify the see-saw between supply and demand sides. Trading sentiment will remain modest. Domestic caustic soda output will continue increasing with new capacities coming on stream. Some of the new products will be offered into the overseas markets, but a majority will be digested domestically. This will boost domestic supply. The efforts toward the targets to achieve peak carbon emission and carbon neutrality, as well as the rising environmental requirements pose pressure on the downstream alumina, paper making, printing and dyeing industries, which inject uncertainties into caustic soda demand. The domestic caustic soda market is likely to stay in narrow swings in the second half of 2021.
The dual control over energy consumption and intensity started to affect more areas in northwest China, the major calcium carbide producing region, with measures to curb output released in Shaanxi and Ningxia. This may prolong the already tight calcium carbide supply. High and stable calcium carbide prices will provide strong support for the PVC market. Limited new PVC capacities launched operation in China in the first half of 2021, but there are many start-up plans in the second half of the year, which may increase domestic PVC supply. The US PVC plants mostly resumed normal operation from June and demand from India shrank, dampening China’s PVC exports. The support from the PVC export market is likely to weaken notably in the second half of 2021.
