Currently, there are few maintenance plans for PVC plants, with sufficient supply. The downstream has entered the seasonal off-season, and the demand for stockpiling before the Spring Festival is gradually decreasing. Social inventories continue to increase, and the market fundamentals are weak.
By the end of 2025, the Ministry of Finance pre-allocated the 2026 quotas for trade-in and "two key areas" (major projects and major initiatives). In December 2025, China's Manufacturing PMI and Non-manufacturing Business Activity Index both rose into the expansion range. With the macro environment recovering, sentiment in the commodity market was boosted, and the price of PVC futures rebounded from the bottom to 5,000 CNY/ton. Since 2026, affected by factors such as cooling bullish sentiment, the cancellation of export tax rebate policies, and weak fundamentals, the price of PVC futures has fluctuated and pulled back.
The rate of capacity expansion has slowed down
Although the number of newly commissioned calcium carbide-based plants has decreased due to poor profits and restrictions from environmental protection policies, there were still multiple new ethylene-based plants put into operation in 2025, accounting for 72% of the newly added production capacity. Specifically, several new plants were commissioned between August and September 2025, including those of Xinpu Chemical, Shaanxi Jintai, Fujian Wanhua, Tianjin Bohua, and Qingdao Haiwan. Additionally, with the permanent shutdown of the old plant of Hubei Yihua, the actual production capacity in 2025 increased by 2.08 million tons to 29.62 million tons, reaching a record high, with the capacity growth rate rising to 7.55%.
In 2026, only the 300,000 tons/year Jiahua plant in Jiaxing, Zhejiang Province will be put into operation in China. Some small-scale old calcium carbide process plants with high costs, high energy consumption and unfriendliness to the environment may be eliminated. In 2026, the new overseas PVC production capacity will only be a 350,000 tons/year project in the United Arab Emirates. Some plants in Europe and the United States are also facing elimination pressure. Vynova Wilhelmshaven GmbH filed for bankruptcy in mid-December 2025, and the PVC production capacity of this plant is about 320,000 tons/year. The expansion speed of global PVC production capacity has slowed down significantly, and the pressure of overcapacity is expected to be significantly alleviated in 2026.
In terms of chlor-alkali, the comprehensive gross profit is under pressure, and the market expects the operating rate of PVC to decline. However, the willingness of the industry to stop production for maintenance in winter is not high. At present, the scale of production reduction is limited. This week, only a few plants such as Fujian Wanhua and Salt Lake Magnesium Industry are still under maintenance, and there are no new maintenance plans recently. The overall operating rate of PVC has not changed much, remaining at around 80%, and the market supply is sufficient.
Weak demand
Last year, the real estate industry was still in a stage of slow recovery. From January to December 2025, the year-on-year declines in real estate investment, new construction area, construction area, and completed area remained relatively large, and the year-on-year growth rates of data such as investment, sales, and completions further decreased. The weekly transaction area of commercial housing in 30 large and medium-sized cities continued to rise month-on-month, but it was still at the lowest level in the same period in recent years. Housing prices in most cities had not yet stopped falling, and it would take time for the real estate sector to improve. At present, the downstream of PVC has entered the off-season. As of the week ending January 15, the operating rate of PVC downstream decreased by 0.11 percentage points month-on-month, and the operating rate of rigid product profiles related to real estate decreased by 0.31 percentage points. Orders for downstream products were poor, and the willingness to actively stock up was low. Demand is expected to continue to weaken before the Spring Festival.
Against the backdrop of weak demand, domestic social inventories continue to increase. As of the week ending January 15, the social inventory of PVC rose by 2.70% month-on-month to 1.1441 million tons, up 48.60% year-on-year. Among them, the inventory in East China was 1.0893 million tons, a year-on-year increase of 48.22%; the inventory in South China was 54,800 tons, a year-on-year increase of 56.62%. The high level of social inventories has brought significant pressure on inventory destocking.
Export tax rebate cancellation
In 2025, China's PVC exports reached 3.8232 million tons, a year-on-year increase of 46.09%, hitting a new historical high again. It accounted for 15.6% of PVC output, becoming an important means to ease the pressure of oversupply. India is the largest export destination for China's PVC, with exports to India accounting for 40% of total exports. In November 2025, India announced the abolition of BIS certification, and the anti-dumping duty on China's PVC was finally closed with no taxation, which is beneficial to PVC exports.
On January 9, 2026, the Ministry of Finance and the State Taxation Administration issued the "Announcement on Adjusting the Export Tax Rebate Policy for Photovoltaic and Other Products". Among the list of products whose value-added tax export tax rebates are cancelled, there are other primary forms of pure polyvinyl chloride (excluding polyvinyl chloride paste resin), primary forms of unplasticized polyvinyl chloride, and primary forms of plasticized polyvinyl chloride. This policy will be implemented from April 1, 2026.
The export tax rebate rate for PVC is 13%. Based on the current price of 4,500 CNY per ton, if the export tax rebate is canceled, the export cost of PVC will increase by approximately 520 CNY per ton. The increased cost will weaken the price advantage of domestic PVC in the Asian market, which will undoubtedly force the elimination of backward production capacity. However, due to insufficient overseas production capacity, there is still room for growth in domestic PVC exports. Recently, a phenomenon of "rush exports" has emerged. Last week, the number of PVC export orders increased significantly, reaching a high level in recent years.
Summary
Overall, the comprehensive gross profit of PVC and caustic soda in Shandong region is in deficit. Recently, the price of caustic soda has continued to fall, the cost support for PVC has gradually increased, and there is significant room for valuation repair in the future. However, at present, there are few maintenance plans for PVC plants, the supply is sufficient, the downstream has entered the seasonal off-season, the demand for stockpiling before the Spring Festival is also gradually decreasing, social inventory continues to increase, and the market fundamentals are weak. Coupled with the low basis, the number of futures warehouse receipts is still at a high level, the macro optimistic sentiment has cooled down somewhat, and the decline in international oil prices is also difficult to provide strong cost support, resulting in insufficient upward momentum for PVC. It is necessary to pay attention to the plant maintenance plans after the Spring Festival and the industry's "anti-involution" policies. Under the pressure of costs, it is expected that the scale of spring maintenance this year will expand.
