PVC is an important synthetic plastic material, which is formed by the free radical polymerization of vinyl chloride monomer (VCM) under the action of initiators such as peroxides and azo compounds or under the influence of light and heat. It is the third most produced synthetic polymer plastic in the world. Due to its excellent heat resistance, wear resistance, corrosion resistance, fire retardancy and insulation, PVC is widely used in many fields such as construction, power, automobiles, home appliances, packaging and medical care.

According to different application scopes, PVC can be classified into general-purpose PVC resin, high degree of polymerization PVC resin and cross-linked PVC resin. Among them, the general-purpose PVC resin is formed by the polymerization of vinyl chloride monomers under the action of initiators; High polymerization degree PVC resin refers to the resin polymerized by adding chain growth agents to the vinyl chloride monomer polymerization system. Cross-linked PVC resin is a resin polymerized by adding a cross-linking agent containing dienes and polyenes to the vinyl chloride monomer polymerization system.

In addition, according to the polymerization method, PVC can be classified into four major categories: suspension PVC, emulsion PVC, bulk PVC and solution PVC. Among them, suspension method polyvinyl chloride is the most produced variety, accounting for about 80% of the total PVC output. According to the amount of plasticizer, PVC plasticizer plastics are often classified into non-plasticized PVC (plasticizer content is 0), rigid PVC (plasticizer content is less than 10%), semi-rigid PVC (plasticizer content is 10-30%), flexible PVC (plasticizer content is 30-70%), and PVC paste plastics (plasticizer content is over 80%).

The upstream of the PVC industry chain mainly includes raw material suppliers such as limestone, coal, chlorine gas, vinyl chloride (VCM), calcium carbide, liquid ammonia, and ethylene, power generation suppliers, and chemical machinery manufacturing providers. The technologies and processes in these industries are mature, the market competition is full, and the product supply is abundant, which can well meet the production and operation needs of the polyvinyl chloride industry and provide an important guarantee for the sustainable development of the industry. The midstream of the industrial chain consists of PVC manufacturers. The downstream of the industrial chain is the application field of PVC, mainly used in the production and manufacturing of shoe soles, artificial leather, films, cable materials, pipes, pipe fittings, profiles and other fields, and ultimately applied in industry, construction, agriculture, daily life, packaging, power, public utilities and other fields.

Industrial demand

In terms of demand, PVC downstream products can be divided into two types: hard products and soft products. Hard products include pipes and pipe fittings, profiles for doors and Windows, hard sheets and other sheet materials. Among them, pipes and profiles are the main downstream demands, accounting for more than 50%. As the main downstream, the demand growth rate of pipes is relatively fast. Leading real estate and construction enterprises have high orders, and the consumption of PVC raw materials has increased significantly. Soft products include flooring and other sheet flooring materials, films, cable materials, artificial leather, shoe and sole materials, etc. In recent years, the export demand for PVC flooring has increased, becoming a new direction for the growth of PVC demand. In terms of terminal demand, real estate, with a proportion of nearly 50%, has become the most important national economic sector influencing PVC, followed by infrastructure, durable goods, disposable consumer goods and agriculture.

From 2021 to 2022, due to factors such as the overall downturn in the real estate industry and insufficient downstream operating rates, the apparent demand for PVC in China declined. In 2022, it dropped to 20.1083 million tons, a year-on-year decrease of 2.66%. In 2023, in order to enhance the confidence of the real estate industry and the market, China and various regions have frequently introduced supportive policies for the real estate sector. According to incomplete statistics, as of December 29, 2023, more than 200 provinces, municipalities and counties across the country have optimized and adjusted their real estate policies, and introduced over 600 regulatory measures. Favorable policies include the abolition of purchase restrictions, the reduction of down payment ratios, and the increase of the maximum loan amount for housing provident funds, etc. Entering 2024, policies promoting residents' real estate purchases in various regions have been further released and implemented. Against this backdrop, China's real estate industry has shown signs of recovery, with the area of completed real estate projects increasing and the sales of ready-to-move-in commercial housing rising. At the same time, as the country grows, it further promotes the growth of PVC demand. Under the combined effect of these factors, the apparent demand for PVC in China has rebounded in the past two years. In 2023, the apparent demand for PVC across the country rebounded to 20.666 million tons, with a year-on-year growth rate of 2.77%. The scale of PVC application demand in the domestic market is expected to further increase in 2024.

Current situation of the industry

In 1958, the first set of PVC production facilities in China was completed and put into operation at Jinhua Factory, officially kicking off the development of the PVC industry. However, due to the influence of factors such as technology, its production capacity did not reach 1 million tons until 1990. Entering the 21st century, along with the rapid development of the real estate market and the advancement of production technology, China's PVC industry witnessed a wave of capacity expansion. The production capacity rose from 2.39 million tons in 2000 to 14.48 million tons in 2007, with an average annual compound growth rate of 26.64%. Since 2008, China's PVC production capacity has continued to expand, reaching 24.76 million tons by 2013.

However, with the expansion of domestic PVC production capacity, the phenomenon of overcapacity in the industry has gradually emerged, leading to a decline in product prices and a decrease in the industry's profit level. Therefore, in 2014, China's PVC industry gradually eliminated backward production capacity, and supply-side reform began at the end of 2015. After market-based regulation, China's PVC production capacity reached 23.26 million tons in 2016, with a net reduction of 1.5 million tons. In 2016, China's PVC production capacity saw a slight increase, reaching 24.06 million tons, with a year-on-year growth of 3.44%. In 2018, it experienced a slight decline, dropping by 0.08% year-on-year.

In recent years, despite the impact of environmental protection policies such as "dual carbon" and "dual control of energy consumption", the elimination of backward PVC production capacity in China has continued. However, the continuous introduction of new production capacity has led to a steady increase in the industry's overall capacity, reaching 27.26 million tons by 2023, a year-on-year increase of 2.5% compared to last year. Among them, the production capacity of PVC produced by the calcium carbide method is 21.45 million tons. The production capacity of PVC by the ethylene process is approximately 7.36 million tons. From the perspective of regional distribution, the leading domestic PVC production capacity enterprises are mostly concentrated in Xinjiang, Inner Mongolia, Ningxia, Shaanxi in Northwest China, as well as Shandong and Tianjin in North China.

In terms of output, in recent years, with the continuous online application demand in the domestic market, the growth of the industry's export scale and the increase in domestic production capacity layout, the output of PVC resin in China has remained relatively stable for a long time, with the overall industry output remaining at around 20 million tons. According to statistics, the total output of PVC resin in China reached 22.377 million tons in 2023, with a year-on-year growth rate of 1.9%. In the first half of 2024, the national PVC output reached 11.5775 million tons, increasing by 5.72% year-on-year. In the future, the upgrading and transformation speed of production equipment capacity, ‌ skills and ‌ environmental protection technologies in the PVC industry will continue to increase, which will accelerate the development of the industry towards environmental protection and low carbon, ‌ low energy consumption and ‌ large-scale benefits. It is predicted that the domestic PVC output will still maintain a growth trend in the coming years.

Based on the above analysis, as one of the world's largest producers and consumers of polyvinyl chloride (PVC), China has a huge market demand for PVC, which is widely used in numerous fields such as construction, power, automobiles, home appliances, packaging, and medical care. With the development of China's economy and the advancement of urbanization, as well as the improvement of people's living standards, all these have brought positive impacts on the demand for PVC in the market, continuously driving the growth of the industry scale. Data shows that the scale of China's PVC industry has grown from 91.689 billion yuan in 2012 to over 200 billion yuan in 2023, and the market size is expected to further expand in 2024.

Enterprise pattern

The polyvinyl chloride (PVC) industry is highly competitive and has a relatively low market concentration. At present, the domestic production capacity of polyvinyl chloride is mainly concentrated in the northwest and North China regions, among which the northwest is the largest capacity aggregation area in China. Large enterprises in the industry have enhanced their market competitiveness and economies of scale through means such as mergers and acquisitions and capital integration. Leading enterprises such as Xinjiang Tianye, Junzheng Group, and Yingli Te occupy a large share of the market. Meanwhile, with the intensification of market competition, enterprises need to strengthen technological innovation and brand building to enhance their competitiveness.

Ningxia Yinglite Chemical Co., Ltd. was established on November 12, 1996, and was listed on the Shenzhen Stock Exchange on November 20, 1996, with the stock abbreviation "Minzu Chemical". In June 2003, the company completed the reorganization of Minzu Chemical, with the stock abbreviation "Yinglite". Yinglite's main business includes the production and sale of primary forms of plastics such as calcium carbide, PVC, caustic soda, hydrochloric acid, and liquid chlorine, as well as synthetic resins, and the production and sale of electricity and heat. At present, the company has an annual production capacity of 400,000 tons of calcium carbide, 260,000 tons of PVC (polyvinyl chloride) (including 40,000 tons of paste resin), 210,000 tons of caustic soda and 36,000 tons of hydrochloric acid. In the first half of 2024, Yingli Te's PVC business revenue was 542 million yuan, representing a year-on-year growth of 27.29%.

Shanghai Chlor-Alkali Chemical Co., Ltd. was founded in July 1992 and was restructured from Shanghai Chlor-Alkali General Factory. It is A state-controlled listed company that issues A and B shares, with the stock abbreviation "Chlor-Alkali Chemical". The main business of chlor-alkali Chemical Industry includes the manufacture and sale of caustic soda, chlorine and chlorine products, as well as polyvinyl chloride plastic resins and products. At present, the company has an annual production capacity of 1.02 million tons of caustic soda, 720,000 tons of dichloroethane, 600,000 tons of liquid chlorine, 200,000 tons of vinyl chloride and 480,000 tons of polyvinyl chloride (PVC). In the first three quarters of 2024, the revenue of the PVC business of chlor-alkali chemical industry was 1.899 billion yuan, representing a year-on-year growth of 27.83%.

Development trend

The relationship between supply and demand in the market may change

In recent years, the supply and demand relationship in China's PVC industry has undergone significant changes. Due to the rapid development of the domestic economy, the demand for PVC has been constantly increasing, and the production capacity has also grown rapidly. However, with the economic slowdown and the weak follow-up of the demand side, the PVC industry has gradually formed a situation where supply exceeds demand. In the future, the production capacity of PVC is expected to continue to increase, but the demand side may stagnate or even decline, and the imbalance between supply and demand may further intensify. Therefore, PVC enterprises need to closely monitor market dynamics and flexibly adjust production strategies to cope with possible challenges.

2. Enterprises are constantly increasing their investment in green and environmentally friendly development

Under the backdrop of increasingly strict environmental protection, the PVC industry will pay more attention to sustainable development. Enterprises need to increase investment in environmental protection and promote the development of green production and circular economy. The research and application of environmentally friendly products such as bio-based PVC and recyclable PVC will become an important direction for the development of the industry. Meanwhile, the government will continue to introduce relevant policies, strengthen environmental protection supervision, and promote the PVC industry to develop in a more environmentally friendly and sustainable direction. This will help enhance the overall competitiveness of the PVC industry and promote its healthy development.

3. Technological innovation and upgrading in the industry have accelerated

In the future, technological innovation and industrial upgrading will be the key to promoting the development of the PVC industry. Enterprises need to enhance technological innovation, improve production processes, and increase product quality and performance to meet the diverse demands of the market. Optimize the industrial structure through means such as mergers and acquisitions and the elimination of backward production capacity, and enhance the industry concentration and competitiveness. In addition, the PVC industry will also actively explore emerging markets such as the automotive manufacturing industry, 3D printing, and the medical industry, bringing new development opportunities to the PVC market. This will help promote the transformation and upgrading as well as the sustainable development of the PVC industry.

● The above data and information can be found in the "China PVC Industry Market Research Analysis and Investment Prospect Evaluation Report" published by Zhiyan Consulting (www.chyxx.com).