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PVC: Industry Development Faces Multiple Tests
In 2007, the PVC industry in China continued to show strong growth momentum. However, 2008 brought both opportunities and challenges. The rapid development of the macro-economy provided solid support for the sector, but new policies such as circular economy initiatives, energy-saving measures, and reduced export tax rebates introduced significant changes. Additionally, the removal of preferential tariffs, stricter access requirements, the implementation of EU REACH regulations, and international trade disputes began to shape the future of the chlor-alkali industry.
By 2007, China’s PVC production capacity had reached a record 15.2 million tons, marking a more than 30% increase from the previous year. Output totaled around 9.6 to 9.7 million tons, making China the world's largest producer. Domestic consumption exceeded 10 million tons, also ranking first globally. The industry expanded rapidly with numerous reconstruction, expansion, and new projects underway. Equipment scale became more optimized, and technological levels improved, enhancing the overall strength of the sector.
Production capacity was concentrated in East China, North China, and Northwest China. In eastern China, where production had historically been high, the share of capacity declined due to environmental concerns and raw material constraints. Meanwhile, the calcium carbide process, known for its cost advantages, remained competitive, accounting for nearly 75% of total production. Rising raw material prices, driven by energy-saving and environmental protection efforts, supported PVC market stability. Exports continued to grow, with over 594,000 tons of PVC powder exported between January and October 2007, though trade frictions started to emerge.
As the industry grew, competition among companies intensified, expanding beyond the market into areas like cost control, technology, product variety, quality, environmental compliance, and safety. Long-term development of PVC, an energy-intensive industry, would be influenced by energy and raw material prices, ongoing construction projects, the integration of chlor-alkali and petrochemical industries, plant layout, environmental safety, and market trends.
Looking ahead to 2008, the domestic and global landscape was expected to change further, accelerating industry consolidation. Key factors to watch included:
First, continued expansion of PVC production capacity. Domestic PVC output was projected to grow at a high rate, with major players like the Midwestern Coal and Salt Industry Group leveraging their resources and financial strength to expand across sectors. New capacity was expected to exceed 3 million tons this year.
Second, the impact of industrial access policy adjustments. The threshold for PVC project construction and expansion was raised to 300,000 tons annually, aiming to enhance industry concentration. While the policy encouraged resource optimization, it imposed more restrictions on calcium carbide-based companies compared to ethylene-based ones. This shift would significantly affect the industry's future direction.
Third, regulation of the export market. With China's PVC exports rising sharply, the industry faced increasing trade barriers, including anti-dumping measures in countries like India, Turkey, and Brazil. Companies needed to adapt and ensure sustainable international operations.
Fourth, the effect of export tax rebate changes. Due to trade imbalances, the government reduced the export tax rebate for PVC to 5%, squeezing profit margins. The RMB’s appreciation also posed a challenge for exporters.
Fifth, stricter environmental standards. As environmental regulations tightened, calcium carbide plants that failed to meet requirements risked closure, leading to supply shortages and higher raw material costs. This could weaken the competitiveness of the calcium carbide process, while integrated producers stood to gain a stronger advantage.