Oversupply in China PVC Powder Market to Last
Preface: Since 2022, the Chinese PVC powder market has gradually shifted to a state of oversupply, leading to a deterioration in industry performance. The supply side of the PVC powder market has entered a phase of optimization and adjustment. Beginning in 2023, some capacities have gradually been eliminated. However, new units are put into operation, making it difficult to reverse the oversupply situation in the short term.
PVC Powder: Oversupply Pressures Industry Performance
Since 2022, the ending social inventory piled up notably, and this trend has continued in 2023. Inventory, as a reflection of the supply-demand balance, indicates that the PVC powder industry has gradually entered a state of oversupply since 2022, with the supply-demand imbalance becoming more pronounced in 2023. The oversupply in 2022 was primarily due to the supply side still being in an expansion phase, while demand was weak. The demand for PVC powder is closely related to the real estate industry. As the real estate sector entered a phase of deep adjustment, the growth pace of PVC demand slowed, leading to a gradual oversupply in the industry.
Under the conditions of oversupply, the operation of the PVC powder market has deteriorated. Starting in 2022, PVC powder prices have fallen from highs and hovered at lows. As prices declined, the profitability of the PVC powder industry worsened, with single-product operations remaining in a loss-making state for an extended period. Amid worsening industry conditions, market competition has intensified, prompting the supply side to initiate spontaneous adjustments.
Increased Elimination and Long-term Shutdown of Capacity Starting in 2023
As industry conditions have worsened in recent years, the PVC powder supply side has begun to undergo spontaneous adjustments, with producers seeking alternative paths. Beginning in 2023, some capacity has gradually exited the industry. Between 2023 and 2024, it is estimated that 1,020kt/a of PVC powder capacity will be withdrawn from the market (capacity that has been in long-term shutdown and is not counted in capacity statistics). Some units have already been dismantled, and others have been repurposed for the production of different products. Additionally, since 2022, some PVC powder units have been in a state of long-term shutdown (primarily those with uncertain restart timelines), with long-term shutdown capacity totaling 1,070kt/a. The exit and long-term shutdown of capacities primarily involve facilities with relatively weaker costs and competitive advantages. Although these involve 13 producers, most of the capacity is relatively small, totaling an estimated 2,090kt/a. This indicates that the industry has begun spontaneous optimization and adjustment of its capacity.
Capacity Expansion Continues, and New Capacity Exceeds Eliminated Capacity
In 2023, China’s PVC powder capacity expansion amounted to 1,700kt/a. It is expected that 1,100kt/a capacity will be released. Total new capacity is expected to reach 2,800kt/a from 2023 to 2024, while 2,090kt/a units were eliminated or shut down.
Starting in 2023, under higher industry pressure, the pace of capacity exit has accelerated. However, with new capacity continuing to be rolled out, the total PVC powder capacity remains on an upward trend in absolute terms. Looking ahead to 2025, 2,100kt/a units are planned to be put into operation, which suggests that supply-side pressure may continue to grow. In the absence of significant demand growth, the speed of subsequent supply-side adjustments may accelerate.
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