By Li Jingmin, Sinopec Qilu Petrochemical Company

Sufficient PVC supply and fierce competition

Stimulated by high profits, domestic PVC capacity has greatly expanded in recent years, and increased by 1.6 million t/a in 2022 – including 200 000 t/a from Dezhou Shihua Chemical, 400 000 t/a from Cangzhou Julong Chemical, 400 000 t/a from Shandong Xinfa, 200 000 t/a from Qingdao Haiwan and 400 000 t/a from Huayi Qinzhou. Domestic PVC capacity has reached 28.73 million tons, ranking first in the world continually. In 2023, units with a combined capacity of 1.9 million t/a are expected to be put into production, with capacity of units employing calcium carbide process reaching 300 000 t/a and that of ethylene-process units reaching 1.6 million t/a (see Table 1 for details).

PVC prices dropped in the second half of 2022, resulting in a sharp profit decline. Producers choosing calcium carbide process suffered great losses, and some of them halted or reduced production. Manufacturers of ethylene-process PVC made meager profits. Hence, some PVC capacity expansion projects may be postponed in 2023, lowering new capacity in the year to around 1-1.2 million t/a. However, China’s PVC capacity will keep growing rapidly, leading to sufficient supply and intense competition.

Growing demand

In China, PVC is mainly used in floor, pipe fitting, plastic profiles, wallpaper, electric wire, cable and other building materials areas, with the first three accounting for around 55% of total PVC consumption. However, PVC demand from the building materials industry has plummeted since 2021, as real estate related policies and the coronavirus led to plunging real estate transactions and capital chain break of some real estate enterprises.

Given factors like low operating rates of PVC downstream firms, current suspension of real estate and infrastructure construction in the North, etc., PVC demand is forecast to remain sluggish before spring of 2023, but in the second quarter, it may increase rapidly, mainly because of policies to stimulate real estate industry, recovery of real estate and infrastructure construction.

Greater pressure on export

China’s PVC capacity accounts for half of the world’s total, and China is also a main source of supply increment. Due to limited demand growth, exporting PVC is inevitable. Domestic PVC is exported mainly to countries in Central Asia, South Asia, Southeast Asia – with India, Vietnam and Bangladesh being the top 3 export destinations. In September 2022, India conducted anti-dumping investigations on PVC from China and the US. Meanwhile, inflation in Europe and America, falling demand and cheaper products from the US exerted greater pressure on domestic PVC exporters. It is forecast that export volume of PVC for 2023 may decrease year-on-year.

Forecast of domestic PVC prices in 2023

Domestic prices of PVC are predicted to stay at a low level for a period in 2023, and then will show an upward trend. The prices may reach a high of RMB7 500/t in September-October, but then may decrease again (see Figure 1 for details).

Figure 1  Forecast of PVC price trend in 2023

More specifically, average prices of PVC fluctuated from RMB6 000/t-RMB6 400/t during January-February due to weak demand (arising from global economic recession, China’s cold weather, Spring Festival vacation, etc.) and high inventory, but after March the prices may grow rapidly, given many factors including new economic stimulus plans – which may be issued after March, and may increase PVC demand and calcium carbide prices –, increasing export volume, etc. In April and May, when peak demand season will come, many upstream units will be overhauled and export volume will increase continually, domestic PVC prices are forecast to keep rising, but the growth will decelerate. An off season will come in June, when unit overhaul will basically finish, domestic PVC prices will start falling in the month, and decline to a low level in July. Another peak demand season and unit maintenance period is August, and PVC prices will rebound rapidly, and go up to the year’s high during the end of September-beginning of October. In November, when coal and calcium carbide prices will increase, PVC prices may stay at a high level for a short term and then gradually decrease. Slight rebound of PVC prices is possible in December, propelled by futures and export.