Global PVC production capacity will surge by 9 million tons within five years

The strong prospects of the global vinyl market have sparked a new investment frenzy, with at least 9 million tons of annual production capacity expected to be added from 2023 to 2027, and most of the new production capacity will be concentrated in China and India, two demand growth centers. The United States will attract some investment due to its cost advantage, and the Middle East and Southeast Asia will also add some new production capacity.

We expect the PVC market demand to significantly increase in the next few years, especially in China S&P Global predicts that by 2027, the global demand for PVC resin will reach 58 million tons, with a compound annual growth rate of nearly 4%.

19 new PVC production capacity projects

The future demand growth for PVC resin will be concentrated in China and India. The growth rate of Chinese demand is expected to slow down from approximately 4% annually to 3%, but Chinese demand accounts for approximately 44% of global total demand. The size of the Indian market is still relatively small, with a demand of slightly over 4 million tons in 2022. However, it is expected that the demand growth rate will soar from an average annual growth rate of 4% in 2017-2022 to 6% or even higher in 2023-2027. India will account for nearly 20% of the new demand for PVC resin in the coming years, while other regions with high demand growth include Southeast Asia, the Middle East, and Africa, which are expected to account for nearly 20% of the new demand.

The increase in PVC resin production will also be mainly concentrated in China and India. It is reported that the total newly added production capacity of 9 million tons/year of PVC includes 19 projects, most of which are in China and India.

It is reported that Adani Group of India will put into production a PVC production capacity of 1 million tons/year in 2025, and an additional 500000 tons/year in 2027; Xincheng Industry will invest 1.5 million tons/year of PVC production capacity in 2026. Industry insiders say that India's addition of 3 million tons/year of PVC production capacity will have a significant impact on trade relations. In the past two years, there has been a serious imbalance in the supply and demand of PVC in India, resulting in the import of approximately 2 million tons of PVC resin in 2022. The total global import of PVC in 2022 is 13 million tons. India is the largest PVC importer, while Türkiye and Vietnam rank second and third respectively.

China's PVC exports surge

Japan and South Korea have always been the main sources of PVC imports from India. But in the past two years, China has gradually become a new major source of import for India. In 2022, China's PVC exports to India reached 600000 tons, and China's PVC exports to other regions have also surged.

In the past 10 years, the global PVC trade volume has increased by 2 million tons. Although North America and Western Europe have always been in a leading position, there have been some changes due to the outbreak of the epidemic Thomas pointed out that "China's export participation has increased in 2022 and set a historical high for vinyl product exports. Since the epidemic, China's PVC resin exports have increased by about 400%, from about 500000 tons per year to 2.2 million tons per year.

In addition, the growth of China's PVC exports also stems from the shutdown of European manufacturers. The outbreak of the Russia-Ukraine conflict led to soaring energy costs and forced European vinyl producers to reduce production. Last year, PVC exports in Western Europe decreased by about 500000 tons. According to data from the European Chloroalkali Industry Association, in December 2022, Europe produced 500000 tons of chlorine gas, compared to 800000 tons in December 2021. The decrease in chlorine production means a decrease in vinyl resin production, which in turn has changed the global PVC trade channel. Nevertheless, Western Europe remains the main export region for PVC in 2022. In the global PVC trade volume of 13 million tons that year, Western Europe accounted for 3 million tons, North America accounted for 3 million tons, Northeast Asia (excluding China) accounted for 2.5 million tons, China accounted for 2.2 million tons, and other regions accounted for 2.3 million tons.

The cost advantage of PVC in the United States remains unchanged

The high interest rates and weak economic growth in the United States are expected to bring pressure to the real estate market this year, which will have a certain impact on the growth rate of PVC demand in the United States. But American vinyl resin manufacturers have a cost advantage. Low natural gas prices mean lower production costs for the raw material of PVC - chlorine gas, while low ethane prices mean lower costs for ethylene raw materials.

This advantage has led to an increase in PVC demand and exports in the United States in January, and has maintained a strong growth trend. It is expected that American manufacturers will fully utilize their cost advantages to expand production, meet domestic demand in the United States, increase exports, and achieve higher production growth in 2023.

Despite a decrease in global and US demand for PVC in 2022, North American production increased by 3%. In the second half of 2022, the demand for PVC in the United States plummeted, reaching a bottom of approximately 272000 tons in December of that year, the lowest level in 8 years; But exports doubled to 249000 tons.

According to institutional predictions, in the next three years,

The price remains above $4 per million British thermal units, and the price of ethylene is approximately $550 per ton. Based on this calculation, it is expected that the cost of PVC in North America will decrease by about 20%, which means the price per ton is between $650 and $680.