Domestic supply exceeds demand and overseas demand grows. In 2023, PVC resin exports hit a historic high

PVC powder export overseas demand and supply pressure

Since 2023, the export of PVC resin in China has shown a continuous increasing trend. On the one hand, Chinese PVC powder enterprises have actively gone abroad to seek cooperation opportunities and make up for the problem of insufficient domestic demand by increasing external demand; On the other hand, overseas demand in India, Southeast Asia, and other regions is good, leading to an increase in demand for PVC resin in China. For 2024, it is expected that PVC resin exports will remain high, both in terms of price and demand factors.

Since 2023, China's PVC exports have continued to grow, with an expected annual export volume reaching a historic high. The increase in export volume is due to the oversupply of domestic demand, resulting in low domestic prices and a certain price advantage in exports. On the other hand, there is good demand from overseas countries such as India and Southeast Asia, which increases the demand for PVC resin in China.

Export volume is expected to reach a historic high in 2023

Since 2023, PVC powder exports have remained strong, with an expected annual export volume of 2.2578 million tons, a year-on-year increase of 14.86%, setting a new record for export volume. From the changes in export volume over the past five years, it can be seen that the export volume of PVC powder has been increasing year by year from 2019 to 2023, especially after 2021 when the export volume has increased significantly compared to the past. There are three reasons for the rapid increase in export volume from 2021 to 2023. On the one hand, from 2021 to 2022, due to adverse weather conditions in the United States, PVC powder plants experienced several instances of force majeure, resulting in a significant reduction in supply. On the other hand, on January 31, 2022, India's anti-dumping policy against Chinese PVC powder expired, bringing opportunities for Chinese exports. The third aspect is that from 2022 to 2023, China's domestic demand has been poor, and the industry has shifted towards oversupply. PVC powder prices are at a low level, and there is a certain price advantage in exports.

In 2023, PVC powder exports showed a growth trend. According to customs data, the export volume of PVC powder from January to October 2023 was 1.9078 million tons, a year-on-year increase of 8.68%. There were three waves of export orders and volume increase within the year, the first from the end of last year to January 2023. Supported by strong expectations of stable domestic growth and a slowdown in interest rate hikes by the Federal Reserve, domestic PVC powder rebounded, and overseas customers such as India took advantage of the situation to buy at the bottom. The second time was from July to August, due to factors such as centralized maintenance of some facilities in the United States and Formosa Plastics, global supply decreased, and China's exports saw an opportunity. The third time was in late October, as overseas inventories such as India were digested, a new round of procurement cycle was released, driving an increase in domestic exports. The increase in export volume has to some extent alleviated market supply pressure and become a major variable in market price fluctuations.

Over supply PVC companies are going global in search of opportunities

In recent years, the significant increase in China's exports is partly due to domestic supply exceeding demand, resulting in price declines and opportunities for exports. From 2019 to 2023, the basic supply and demand of PVC powder shifted from tight balance to oversupply. The market was in a tight balance state from 2019 to 2021, and from 2022 to 2023, the market evolved into an oversupply situation (please refer to the annual report of PVC powder for specific details). The shift in supply and demand is mainly due to the weakening of demand, with about 60% of PVC powder downstream being used in the real estate industry. As the real estate market weakens from 2022 to 2023, the demand for PVC powder related to real estate also weakens. In addition, the concentrated release of new PVC powder production capacity in 2023 will deepen the degree of oversupply in the industry. The increasing pressure on the supply side has brought significant pressure to the PVC powder market from 2022 to 2023. The price of PVC fluctuated between 5600-6500 yuan/ton in 2023, creating a historically low price range and providing opportunities for domestic PVC exports. Major domestic suppliers are seeking overseas opportunities.

Overseas developing countries increasing capital expenditures and increasing demand for basic materials

In recent years, overseas developing countries have increased their capital expenditures, driving the demand for basic materials. The export of many basic materials in the chemical industry has also begun to show significant growth in recent years, and the demand for PVC has also increased significantly. Overseas developing countries, led by India, have seen a significant increase in the import of PVC raw materials from China, and this trend is expected to continue in the future.

For 2024, the pressure of domestic supply exceeding demand still exists, and the expected growth in demand from overseas developing countries is good. It is expected that PVC exports will continue to rise.

The pressure on the PVC powder supply side may continue to be high in 2024. On the one hand, due to the high base of existing production capacity, coupled with the release of 1.6 million tons of new production capacity in 2024. On the second hand, the weakness of the real estate market is difficult to overcome, and there will be no significant improvement in domestic demand for PVC powder in 2024. So it is expected that the situation of oversupply will continue in 2024, and the high supply pressure will continue to exert pressure on the price of PVC powder in 2024, bringing certain opportunities for exports.

The expectation of demand growth in overseas developing countries remains relatively optimistic. Since 2021, there has been a significant increase in the import of basic materials from China by overseas developing countries, mainly due to their increasing capital expenditures. Starting from 2021, the export sales of excavators in China have been rapidly increasing. By August this year, the export sales of excavators even exceeded the domestic sales, indicating that capital expenditures in overseas developing countries are still in the growth stage. Therefore, the demand for basic materials in China, including PVC resin, will remain relatively optimistic in the future.

In summary, both in terms of price and overseas demand factors, it is expected that China's PVC resin exports will continue to grow in 2024. However, it is important to be cautious whether there is a possibility of weakening demand in the United States, whether it will have an impact on the international PVC resin market, and whether there is a possibility of changes in India's PVC trade policy with China.

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