China PVC Powder Market Outlook
Preface: In Q4 2024, limited macroeconomic policy support and insufficient market confidence, coupled with a lack of strong fundamental support, drove PVC prices down continuously, hitting a 9-year low in early December. Looking ahead to Q1 2025, enhanced macroeconomic policy measures are anticipated, with potential market rebounds around the National People’s Congress (NPC) and The Chinese People’s Political Consultative Conference (CPPCC) in March. However, whether policies can effectively stimulate demand remains uncertain. Additionally, the potential impact of U.S. tariff increases on Chinese goods warrants attention.
Q4 2024: PVC Prices Fell to a 9-Year Low
PVC powder prices primarily declined throughout Q4, with prices reaching a 9-year low in December. As of December 31, the quarterly average EXW price of SG-5 in China was RMB 5,244/mt, down RMB 273/mt from Q3’s average of RMB 5,536/mt, representing a 5.26% decline QoQ and a 10.66% decline YoY.
Key Factors Influencing Q4 Market Trends
1. Macroeconomic factors: While domestic and international monetary policies leaned towards easing, the U.S. adopted a hawkish stance under the Trump administration, with potential tariff increases exerting pressure on Chinese exports. Domestically, limited incremental macroeconomic policy measures further dampened market sentiment.
2. Fundamentals: Q4 saw fewer maintenance shutdowns among PVC producers, and PVC producers held operating rates high amid decent profits from producing caustic soda. In December, PVC demand improved. First, as PVC prices dropped to a 9-year low, speculative demand increased. Second, PVC soft product orders increased. Third, after Trump takes office, he will impose higher tariffs on Chinese goods. Foreign buyers showed higher purchasing interest, propping up orders at PVC downstream enterprises. Although speculative demand and downstream demand both increased in December, this staged improvement in demand data is difficult to sustain. At the same time, the improvement in December is more result-oriented under the expectation of low prices of feedstock and tariffs, or there may be a partial overdraft for subsequent demand.
6. Cost factors: Caustic Soda prices moved up from mid-October to late November, leading to improved profitability at integrated PVC-caustic soda producers. The integrated profit in Shandong was RMB 800/mt in November. In December, caustic soda prices moved down, and integrated profits at some producers turned from positive to negative. The integrated profit in Shandong dropped to RMB 177/mt. However, the industrial operating rate failed to drop. Costs failed to support the PVC powder market in Q4.
Q1 2025: Demand Slack Season with a Potential Policy-Driven Rebound in March
1. Fundamental outlook: The Chinese New Year holiday spans January and February, leaving effective demand limited to roughly one month. Inventory accumulation is expected during the holiday period. Demand is likely to improve in March as downstream operations resume, potentially lifting PVC prices slightly. Minimal maintenance activities are scheduled, with only two ethylene-based PVC producers planning maintenance in February and none announced for March. The 250kt/a ethylene-based PVC capacity at SP Chemical may be released in January 2025.
2. Macroeconomic outlook: The NPC&CPPCC in March is a key event for observing China’s policy direction. Anticipation of new policy announcements could boost market sentiment temporarily. However, the real impact on demand will likely take time to materialize. Persistent oversupply in the PVC industry and the lack of recovery in real estate investment may remain significant constraints. As such, policy-driven boosts to PVC prices are expected to be limited.
China’s PVC prices are likely to remain at low levels in January and February due to seasonal demand weakness. A policy-driven rebound may occur around the NPC&CPPCC in March, resulting in a slight upward adjustment in price levels. However, the sustainability of any rebound will likely depend on whether policies can effectively stimulate long-term demand, especially in the context of oversupply and sluggish real estate investment.
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