Performance of China’s PVC industry in H1 2023
Click:14    DateTime:Nov.15,2023

By Li Jingmin, Sinopec Qilu Petrochemical Company

PVC prices in H1 2023

In the first half of 2023, domestic PVC prices – after rising slightly for a short period – have declined until June, when the prices tended to stabilize. In detail, domestic coronavirus restrictions were lifted in December 2022, spurring PVC prices, which rose continually in this January, given factors like optimism on demand after the Spring Festival, enthusiasm of downstream plants to stock up, etc. In late February, unsatisfactory performance of real estate industry in kicking off new projects and limited orders for PVC downstream products could hardly create strong demand for PVC. Hence, a moderate decrease in PVC prices. In the second quarter, overhaul and production load decrease of many PVC firms failed to prevent PVC prices from further falling, as the influence of weak demand and new capacity was bigger. On May 23, price of S-1000 at Shandong market declined to the year’s low of RMB5 560/t, the bottom since May 2020. See Figure 1 for more details.


Figure 1 Domestic and export prices of ethylene-process PVC since 2022

On June 13, export price of ethylene-process PVC tumbled to US$710/t (Tianjin Port), the lowest point in the year and since 2018 – mainly attributable to continuous hikes in interest rates of the Federal Reserve and central banks in many other countries, decreasing demand from main PVC export destination India, etc. However, domestic PVC prices became stabilized in June, due to favorable policies and dropping PVC supply arising from low operating rates of around 67%.

PVC supply in H1 2023

In the first half of 2023, domestic PVC capacity grew 1.2 million t/a – including three new 400 000 t/a ethylene-process PVC units from Guangxi Huayi Chlor-Alkali Chemical Co., Ltd., Wanhua Chemical Fujian Co., Ltd. and Cangzhou Julong Chemical Industry Co., Ltd. – to 27.62 million t/a, accounting for 47% of the world’s total. Rate of capacity utilization rose first, then declined and reached 75.32%, on average, in H1 (see Figure 2 for details). Rate decrease was mainly because of overhaul or production suspension in Q2, and production load dropping 20%-80% at enterprises in Shandong, Hebei, Henan, Shanxi, etc.


Figure 2 China’s PVC output and rate of capacity utilization trend

PVC output reached 11.08 million tons in the first half of 2023. As for PVC import volume, it remained high in Q1 benefiting from removal of domestic coronavirus restrictions, but in Q2, it plummeted as a result of domestic sufficient supply, falling prices, shrinking import profit, etc. See Figure 3 for details.


Figure 3 China’s monthly import volume of PVC

Downstream industries of PVC in H1

Area of real estate projects that newly kicked off slumped 24.3% YoY, and floor area under construction was down 6.6% YoY, both in H1, when average operating rate of PVC downstream product firms – impacted by real estate downturn – reached 48.6%, down 1.38 percentage points from H2 last year. See Figure 4 for details.


Figure 4 Operating rates of China’s PVC downstream product firms from 2021 to 2023

China exports PVC mainly to India and Southeast Asia. In the first quarter, monthly export volume exceeded 200 000 tons, spurred by declining production costs of domestic firms, high demand from India, but in Q2, it dropped owing to rainfall increase in India and Southeast Asia, import restrictions in India, the Federal Reserve raising interest rates, etc. See Figure 5 for details.


Figure 5 China’s monthly export volume of PVC in 2022 and 2023

In the first half of 2023, apparent consumption of PVC was up 1.92% from H2 2022 and up 2.63% YoY to 10.23 million tons, with consumption plunging in February, when PVC output and import volume both decreased. See Table 1 for details.


PVC inventory in H1

In the first half of 2023, inventory of PVC producers exceeded the highest level in 2022, and hit a new high of 650 000 tons because of New Year's and the Spring Festival holidays. Then, the inventory fell slowly, with traders or downstream plants resuming purchase, and the slow decrease of inventory continued in Q2. See Figure 6 for details.


Figure 6 Inventory of China’s PVC producers

As for social inventory of PVC in H1, it showed a similar trend – surging and then falling slowly – compared with same period last year, but average data was up around 33% YoY, a sign of oversupply. See Figure 7 for details. More specifically, social inventory remained relatively low in January due to export and stocking before the Spring Festival, but after the holiday, sluggish real estate industry and unsatisfactory operating rates of PVC downstream plants made PVC social inventory hard to decrease.


Figure 7 China’s social inventory of PVC

Profit of PVC enterprises in H1

In the first half of 2023, gross profit of PVC adopting ethylene process declined continually, with the average reaching RMB385/t, dropping 38.59% from H2 2022 and plunging 73.76% YoY. Main reasons include slightly falling PVC prices and rebounding prices of raw material ethylene.

Benefiting from cost reduction and supply increase of raw material semi-coke, average gross profit of PVC with calcium carbide method rebounded to RMB-324/t in this H1, soaring 49.08% from H2 2022 but plummeting 133.02% YoY.