PVC Production Capacity Structure Adjustment Accelerates, Industry Expansion Pace May Slow Down

Background: In 2025, the domestic PVC production capacity is expected to increase by 2.5 million tons, pushing the total PVC capacity to exceed 29.72 million tons. The new capacity from the calcium carbide method is only 600,000 tons, while the ethylene method will add 1.9 million tons. The new capacity from the calcium carbide and ethylene methods will account for a ratio of 24:76. Once the expected capacity is fully operational, the total capacity of the domestic calcium carbide and ethylene methods will reach a ratio of 70:30, a significant change from the 82:18 capacity structure in 2016.

Over the past decade, PVC production capacity has maintained steady growth.

As shown in Figure 1, the domestic PVC production capacity has maintained a stable growth trend over the past decade. Among them, the growth rate between 2019 and 2020 was relatively fast, with a month-on-month increase of 9.37% from the beginning of 2019 to the beginning of 2020. A number of new production capacities and expansion units were put into operation domestically, accelerating the scale growth of domestic PVC production capacity. By early 2021, the national PVC production capacity exceeded 25 million tons.

As shown in Figure 2, the overall domestic PVC production capacity shows a growth trend. The carbide process production capacity exhibits a growth trend before 2024, but shows a decreasing trend after 2024. In contrast, the ethylene process aligns with the overall production capacity changes, but its growth rate has significantly accelerated after 2021.

Figure 3 more intuitively shows that the capacity of the ethylene method has exhibited a growth trend after 2021. In the capacity share of the acetylene-electric process, the previous 8:2 ratio between the calcium carbide method and the ethylene method has gradually shifted since 2021, reaching a ratio of 73:27 by early 2025. With the further commissioning of ethylene method capacity, there is still room for the ethylene method's share to increase.

Is the increase in PVC production capacity in 2025 the final act?

It is estimated that in 2025, the domestic PVC production capacity is expected to increase by 2.5 million tons, of which the newly added capacity from the calcium carbide method is only 600,000 tons, and the newly added capacity from the ethylene method is 1.9 million tons. As of July, 300,000 tons from the calcium carbide method have already been put into production, and 1 million tons from the ethylene method have been put into production. Another 300,000 tons from the calcium carbide method are scheduled for trial production in September and are expected to be put into production by the end of the year. For the ethylene method, 600,000 tons will be put into production in September, with the remaining 300,000 tons undergoing trial production in September and October, and are also expected to be put into production by the end of the year.

After the full commissioning of the planned production capacity, by the end of 2025, the total domestic production capacity of calcium carbide method and ethylene method will exceed 29.72 million tons. The capacity ratio between the calcium carbide method and the ethylene method will reach the 70:30 dividing line, and the market supply capacity of the ethylene method will have increased significantly compared to ten years ago.

Since 2022PVC PriceThe continuous decline, coupled with the shift from profit to loss in PVC production margins, particularly significant losses in the carbide process, has led to the shelving or postponement of PVC capacity projects that were planned or in progress. It is expected that there will be no new PVC facilities added or commissioned in 2026. The PVC facility projects planned for 2027 to 2030 also face considerable uncertainty. Longzhong preliminarily estimates that before 2030, only about 1.66 million tons of facilities will be realized, all of which will be ethylene-based capacity. As the carbide process faces market and cost competition, some of the carbide capacity will be gradually phased out in the future, and the large-scale addition of such capacity in 2025 may be the last. Overall, domestic PVC capacity is likely to be controlled around 30 million tons.

3. Intensified Competition in the Future PVC Supply Pattern

With the global economic slowdown and the escalation of unilateral trade protectionism, China's PVC industry faces the contradiction of high production capacity supply and slowing consumption due to both real estate reform and pressures on foreign export trade. While seeking to upgrade domestic demand, the industry is also actively expanding external export consumption.

In the contradiction between slowing demand and high supply, the supply of the ethylene-based market in 2025 will continue to grow, which is bound to intensify the sales competition between the domestic calcium carbide process and ethylene-based process markets. The application of the ethylene-based process in some traditional fields of the calcium carbide process (such as flooring, wallpaper, new building materials, high-end fittings, films, and sheet packaging) will gradually increase. Moreover, in terms of policy, cost, export, and demand applications, ethylene-based PVC will still have certain advantages for a long time in the future, and the proportion of the ethylene-based PVC process is expected to further increase. We anticipate that with industrial upgrading and transformation, the integration of the PVC industry chain will also become a trend.