By Wang Yilin, OilChem China

Production continues to increase while special PVC paste resin still needs to be imported

China’s PVC capacity had been increasing from 2005 to 2014, and the paste resin capacity doubled during 2013 to 2014. The surge in capacity leads to oversupply. Then the capacity decreased for the first time in 2015, mainly due to the policy of backward capacity elimination and the relocation of major producers’ units (like Tianjin Bohai Chemical Industry Group’s relocation and Binzhou Zhenghai Technology’s shutdown), and the operating rates declined accordingly. However, on the back of the bull chemical market since the second half of 2016, the PVC paste resin capacity once again rose to 1.435 million t/a at the end of 2018.

   Table 1   China’s PVC paste resin producers, 2019

   China’s PVC paste resin capacity became surplus after continuous expansion, but the downstream demand was weak, leaving the whole industry’s operating rate at 65% in 2018.

   Yangquan Coal Industry Xiyang Chemical shut down its PVC paste resin unit for maintenance on April 16, 2018 and the unit is still offline now. Shanghai Chlor-Alkali Chemical cut its capacity from 60 kt/a to 20 kt/a in the second half of 2018 and the products are only for downstream customers at present. Hubei Shanshui Chemical relocated on January 25, 2019 and its PVC paste resin line has not started yet. Inner Mongolia Yidong Group Dongxing Chemical shut down on April 24, 2019 and there is no information about its re-start. As of May 2019, China’s PVC paste resin capacity was 1.26 million t/a.

   As the downstream processing factories have demand for special grades and have requirements on feedstock standard certification, China needs to import 100 kt of PVC paste resin each year. The major origins are Japan (KANEKA Corporation and Tosoh Corporation), Korea (Hanwha and LG) and Taiwan (Formosa).

   China’s PVC paste resin export remains at 10 kt per year, mainly shipped to India, Vietnam and, Malaysia.

Major downstream industries under pressure due to weak end demand

   The major downstream users of PVC paste resin in China are synthetic rubber, glove and wallpaper, and the major consuming area is eastern China. In 2018, the consumption in South China, East China and North China took 70% of the national total.

   Glove market consumes 28% of the PVC paste resin. With huge demand, the market relies on the imports. Some domestic producers started to manufacture glove PVC recently and the sales are increasing, hence replacing some imports. Major glove producers are located in Hebei, Shandong and Jiangsu. Medical gloves still have much room for development.

   Synthetic rubber consumes 23% of the PVC paste resin. Its supply-demand is basically balanced, but the competition with PU is fierce. The producers are mainly located in Pearl River Delta, Yangtze River Delta, Beijing, Tianjin, Hebei, Hunan, and Shandong.

   Wallpaper consumes 10% of the PVC paste resin. With the continuous improvement of people’s living standard, wallpaper, especially the decorative wallpaper keeps developing. The demand from hotels, public places of entertainment and homes are expanding.

Prices from 2018 to May 2019

   The prices were low in April 2018, so most glove producers cut their operating rates and some even stopped production. The market trades were bearish in Hebei.

   Then PVC paste resin prices started to rebound in late August 2018. The supply of calcium carbide became tight and its prices soared up. 

   PVC paste resin prices surged since March 2019 and reached over RMB1 000/t at early May because of the curtailed output of glove-grade PVC on multi maintenance shutdowns and the robust downstream demand as the glove factories’ in Shijiazhuang were all running at 70-80% utilization and those in Shandong at 70%. 

   However, the upward trend lost momentum after May as the upstream maintenance concentrated in May and June, and the tightness of supply supported the prices of PVC paste resin. In the second half of this year, the price will consolidate at highs and the leather grade will fluctuate in the range of RMB7 500-8 500/t.

Chart 1  China’s PVC paste resin price, 2018-May 2019

Capacity expansions of domestic PVC paste resin lines 

   Shandong Langhui expanded its capacity from 60 kt/a to 70 kt/a in 2018 and then to 80 kt/a in March 2019. Tangshan Sanyou planned to upgrade its technology in April 2019, increasing its capacity to 80 kt/a accordingly, but the plan was postponed. Jilantai’s nameplate capacity was 80 kt/a and only 40 kt/a capacities were running. It plans to shut down the plant for maintenance in June and expand the capacity to 70 kt/a in 2019. Xinjiang Zhongtai’s capacity has reached 100 kt/a, and the trial production will start in October 2019.

   According to rough statistics, there will be 160 kt/a capacities coming on stream in the future, with most located in northwestern China, which will influence the whole industry and the market . 

   Table 2    PVC paste resin capacity expansion in 2019  (kt/a)

Slight decline in production and demand hard to rally up

   PVC paste resin production was 800 kt in 2018. The output in 2019 will reduce by 2.5% to 780 kt due to the de-capacity, and the industry’s operating rate will decrease to 59%. After Tangshan Sanyou, Jilantai and Xinjiang Zhongtai launch their projects in 2019 and 2020, the production will stabilize at 770 kt, with utilization at 58.3% (See chart 2 for details).

Chart 2  China’s PVC paste resin production and operating rate, 2018-2020E

   The PVC paste resin demand in 2018 was 1 019.2 kt and will decrease by 2.31% to 994.9 kt in 2019. Its end market demand is weak and end products are experiencing de-capacity. So, the demand in 2010 is anticipated to reduce by 2.86% to 990 kt. The market is facing a continuously declining demand trend.