In the context of capacity expansion and supply-demand imbalance in the domestic PVC market in 2025, the industry will exhibit a triple characteristic of "high supply, high inventory, and weak demand", with prices hitting a new low for the year before shaking and bottoming out. According to the monitoring of SunSirs, the total annual decline of SG-5 carbide method is 11%.

2025 Market Review: Overall Downward, Mid Year Rebound

In the first half of the year, due to the concentrated release of new production capacity, the supply-demand contradiction showed a slow increasing trend, and the price of PVC continued to fluctuate and fall. According to the monitoring of SunSirs, the price of SG-5 PVC carbide method fell from nearly 5,000 RMB/ton to around 4,500 RMB/ton in the first half of the year.

From June to late July, this period was the only remaining wave of upward trend for PVC throughout the year, mainly due to short-term supply-demand mismatch caused by supply contraction and inventory depletion; The combination of policy expectations and futures speculation is a phased rebound in the "low-level oscillation" pattern throughout the year. And by late July, PVC reached its highest point of the year, breaking the 5,000 RMB/ton mark.

After the end of July, with the gradual resumption of maintenance equipment, continued weak exports, and a return to rational terminal demand, the PVC market returned to a downward trend, with a slight rebound at the end of the year, mainly relying on policy support and futures sentiment repair, and fundamental support remains weak.

Supply and demand pattern: Capacity expansion and closure&sluggish demand, intensifying supply-demand contradiction

Supply side: concentrated expansion and high inventory

Firstly, in 2025, the PVC production capacity will increase by 2.2 million tons (a net increase of 2.05 million tons), and the total production capacity at the end of the year will exceed 29.93 million tons, a year-on-year increase of 7.35%. The proportion of ethylene method will rise to 28%, and the industry will officially bid farewell to the high-speed capacity expansion cycle.

Secondly, the operating rate is at a medium to high level: the annual average operating rate remains in the range of 77% -78%. According to monitoring, the operating rate at the end of the year is about 77%. Although it has fallen from the high level in the previous period, the decline is limited by the constraints of safe operation of the equipment and annual production tasks. Only some small, medium and high cost enterprises have passively reduced their losses, and old facilities in Xinjiang, Shandong and other places have begun to withdraw sporadically.

Finally, the production has steadily increased: from January to November, the cumulative production was 22.32 million tons, a year-on-year increase of 4.35%. It is expected that the annual production will be 24.5 million tons, a year-on-year increase of 4.52%. The ethylene production growth rate is as high as 13%, becoming the core of supply increment.

Demand side: Weak demand, slight improvement in exports

In 2025, the domestic demand for PVC will continue to be weak: 60% of downstream PVC relies on real estate. From January to November 2025, the newly started residential construction area will be 392 million square meters, a year-on-year decrease of 19.9%. Real estate development investment will decrease by 15.9% year-on-year, dragging down the construction rates of pipes and profiles to 37.6% and 35.13% respectively, both below 40%. Infrastructure investment decreased slightly by 0.1% year-on-year, making it difficult to hedge the impact of the real estate downturn in the short term.

External demand became the only highlight, with a significant increase in exports: from January to November, PVC powder exports totaled 3.5 million tons, a year-on-year increase of 47%, and an estimated annual growth rate of 46.7%. India's cancellation of BIS certification and anti-dumping tax policies became a key driving force, with India and Vietnam as the main export destinations (accounting for 41.5% and 6.2% respectively). However, in December, due to the increase in shipping costs, export orders fell month on month, and profit margins were compressed.

Outlook for PVC in 2026

As the starting year of the 15th Five Year Plan, 2026 is highly likely to see a structural adjustment in the PVC industry to clear production capacity, and the supply-demand contradiction may gradually ease. However, the surplus pattern is unlikely to undergo a fundamental reversal, and prices are expected to experience a volatile rebound.

Influencing factors:

Supply side: Insufficient new production capacity and exit of some old production capacity

In 2026, there will be relatively little new production capacity, with only Zhejiang Jiahua's planned production capacity of 300000 tons of ethylene process in China. On the contrary, more production capacity has been driven out of the market by policies. In the first quarter of 2026, there will be a wave of centralized maintenance, and old facilities that have been in operation for over 20 years in Xinjiang, Shandong and other places will accelerate their withdrawal. Coupled with the policy driven clearance of 3 million tons of high cost production capacity, it is expected that the annual supply growth rate will fall back to within 1%, and the industry operating rate is expected to fall back to a reasonable range of 70% -75%. The overall supply side is favorable for the PVC market in 2026.

Demand side: Slow increase in domestic demand and sustained efforts in exports

In 2026, the real estate industry, which is the main downstream consumer sector of PVC, is expected to bottom out and rebound, with policy effects gradually transmitted. It is expected that the decline in new construction area of houses will narrow to within 10% by 2026, the sales area of commercial housing will stabilize, and the growth rate of demand for pipes and profiles will rebound to around 2%. In addition, infrastructure support has been strengthened: major infrastructure projects in the 15th Five Year Plan have been launched, and demand in areas such as municipal pipelines and power engineering has increased. It is expected that the growth rate of PVC demand in the infrastructure sector will reach 5%, becoming an important support for domestic demand. Secondly, exports are steadily growing: the demand in the Indian market continues to release, the Southeast Asian market is stable, and coupled with the market gap caused by the closure of 2 million tons of production capacity in Europe, Japan, the United States and other regions, China's PVC exports are expected to increase by 15% -20% due to its price advantage, and the annual export volume is expected to exceed 4 million tons, becoming a key force for inventory digestion. Overall, demand growth is significantly greater than supply growth.

Inventory and Cost

The turning point of destocking shows the bottom support of costs, and PVC inventory destocking will accelerate in 2026: With the contraction of supply and improvement of demand, it is expected that the second quarter of 2026 will usher in a destocking turning point, and social inventory is expected to fall below 800,000 tons by the end of the year, significantly reducing the pressure on prices. The price of calcium carbide may experience a bottoming out rebound, coal prices remain stable, and the bottom support of PVC costs is highly resilient. The industry's loss situation will gradually improve, and the gross profit of calcium carbide method enterprises is expected to return to the breakeven line.

2026 Price Trend Prediction:

Short term (1-3 months): Before the Spring Festival, the downstream operating rate further declined to 30% -35%, and the off-season demand combined with inventory pressure led to price fluctuations and bottoming out. There is still room for downward movement in the spot market.

Mid term (April September): Capacity clearance and implementation+infrastructure project commencement+resonance during peak export season, improvement in supply and demand pattern driving price recovery, and the spot market may usher in a long-term recovery and upward trend. Spot prices are expected to break through the previous high of 5,000 RMB/ton.

Long term (October December): Demand growth slows down, prices enter a period of consolidation and volatility, and spot prices may fluctuate back to a reasonable range of 4,800-5,000 RMB/ton.

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