According to the Futures Daily, domestic PVC futures prices fell sharply in late March and have now reached a temporary low. Profit margins across the industry chain are poor, leading to a decline in manufacturers’ enthusiasm for production, and output is also expected to fall.

Operating rates have fallen slightly year-on-year

Geopolitical conflicts in the Middle East have disrupted approximately 15% of global ethylene supply, causing ethylene prices to rise significantly. As a result, profits for domestic ethylene-based PVC plants have fallen sharply, with current profits standing at -1,334 RMB/ton. Consequently, the operating rate of ethylene-based PVC plants has fallen sharply to 51.57%, a year-on-year decrease of 28.62 percentage points. However, the domestic PVC production process is predominantly calcium carbide-based, with ethylene-based PVC plants accounting for only 30% of capacity. Furthermore, over the past two months, margins for calcium carbide-based PVC plants have improved significantly compared to the start of this year and the same period last year, with some plants still generating a profit. Furthermore, gross margins for chlor-alkali production in Shandong have improved, currently standing at 228 RMB/ton—a high for the past year. This has boosted production enthusiasm among chlor-alkali enterprises, with the operating rate of calcium carbide-based PVC plants rising to a high for this time of year in recent years, currently at 82.92%, a year-on-year increase of 3.92 percentage points. Overall, the operating rate of PVC plants has fallen slightly year-on-year, currently standing at 73.58%, a decrease of 5.75 percentage points.

Weak Demand

Since the start of this year, the property sector has been in a slump. According to data from the National Bureau of Statistics, from January to March, national property development investment totaled CMY1,772 billion, down 11.2% year-on-year, with the rate of decline widening by 0.1 percentage points compared to January–February; The floor area under construction by real estate developers stood at 541,737 million square meters, down 11.7% year-on-year; the floor area of newly started construction projects was 10,373 million square meters, down 20.3% year-on-year; and the floor area of completed projects was 9,789 million square meters, down 25.0% year-on-year. As a result, demand for building materials has been weak, and operating rates in the PVC downstream sector have also remained low.

Decline in Social Inventories

According to SteelHome data, as of 30 April, domestic PVC social inventories stood at 1.2843 million tons, down by 122,800 tons from the previous high of 1.4071 million tons, representing a decrease of 8.7%. Compared with the same period last year (658,300 tons), this represents an increase of 626,000 tons, or 95%, with inventories remaining at a high level.

In terms of demand, domestic apparent PVC consumption has remained virtually unchanged over the past five years, standing at 20.839 million tons in 2021 and 20.865 million tons in 2025. In stark contrast, as of March 2026, domestic PVC effective production capacity stood at 29.115 million tons, an increase of 5.71% compared to 27.54 million tons in 2024, and a rise of 13.3% compared to 25.87 million tons in 2021; PVC production in 2025 stood at 24.43 million tons, an increase of 2.24 million tons compared to the 22.19 million tons recorded in 2021. Consequently, the domestic surplus PVC capacity can only be absorbed through exports. Due to geopolitical conflicts in the Middle East, production at overseas ethylene-based PVC plants has been restricted. In the first quarter of 2026, domestic PVC exports experienced explosive growth, with cumulative exports reaching 1.4169 million tons, a year-on-year increase of 45.13%. Of this, exports in March amounted to 684,000 tons, representing a month-on-month increase of 52.84% and a year-on-year increase of 86.70%.

It is worth noting that with the abolition of export tax rebate policies and India launching an anti-dumping investigation into Chinese PVC, there are concerns regarding the sustainability of PVC export growth. The situation in the Middle East is unlikely to ease in the short term, with crude oil and ethylene prices remaining at high levels; domestic calcium carbide-based PVC plants thus enjoy a significant cost advantage. Furthermore, India’s implementation of a temporary zero-tariff policy from 2 April to 30 June is expected to benefit PVC exports in the second quarter, suggesting that PVC exports will retain considerable resilience.

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