SunSirs: PVC Exports Show Phased Recovery, Expected to Maintain Firm Trend

Benefiting from a short-term export rebound, continued positive domestic economic outlook, and optimistic commodity market expectations, PVC futures prices rose steadily last Friday, climbing to 5,125 RMB/ton during intraday trading—the highest level since mid-December last year. By the close of the day session, prices had risen 3.41% to 5,063 RMB/ton. Amid the ongoing tug-of-war between weak fundamentals and strong policy expectations, PVC prices are expected to maintain a firm, fluctuating trajectory.

Short-Term Supply Pressure Persists, Long-Term Contraction Logic Clear

From a supply perspective, the dual-track pattern of “short-term ease and long-term tightening” in the PVC market is becoming increasingly evident. The resumption of production at facilities like Jiangsu Xinpu and Ningbo Hanwha has further supplemented market supply, leading to short-term supply ease. It is understood that reduced maintenance shutdowns and increased capacity utilization in January drove monthly output to a historically high level for the period. According to data released by Longzhong Information, the overall operating rate of the PVC industry remained high in January, with estimated capacity utilization at 78.98%, up 0.56 percentage points month-on-month. Specifically, the capacity utilization rate for calcium carbide-based PVC is estimated at 79.76%, a 0.6 percentage point increase month-on-month; while that for ethylene-based PVC is estimated at 77.14%, a 0.57 percentage point increase month-on-month. Consequently, China's January PVC output is projected at 2.1471 million tons, up 50,800 tons or 2.42% month-on-month.

However, in the medium to long term, production contraction driven by the “anti-internal competition” trend has become a consensus. This year's new PVC capacity additions amount to only 300,000 tons (Jiaxing Jiahua facility), signaling the end of the expansion cycle. Meanwhile, the 2.85 million tons of overdue production capacity and 2 million tons of long-term idle capacity currently under investigation by the Ministry of Industry and Information Technology (MIIT) are expected to exit the market in the first quarter. The total scale of high-cost capacity clearance for the year may reach 3 million tons.

Domestic demand shows seasonal weakness while exports experience temporary recovery

Demand remains the weak link in PVC fundamentals, with domestic seasonal weakness contrasting sharply against a temporary export rebound. The domestic market has entered its traditional off-season, with cold weather in northern regions slowing construction progress. Compounded by the approaching Spring Festival, downstream product manufacturers are gradually shutting down for holidays, resulting in overall low operating rates. By the end of January, the composite operating rate for PVC downstream sectors stood at just 45%. Specifically, pipe production operated at 37% capacity, while profile manufacturing ran at 31.5%—both below historical averages for this period. Furthermore, last year's persistent weakness in new real estate starts and construction area indicates that demand recovery across the property chain will take time. End-users maintain cautious inventory replenishment, focusing primarily on meeting immediate needs and showing clear resistance to high-priced materials.

Exports emerged as a bright spot on the demand side. The Ministry of Finance announced on January 9 that PVC export tax rebates (currently at 13%) would be eliminated starting April 1, 2026. This directly triggered a “rush to export” trend, pushing January PVC export orders to multi-year highs. This partially alleviated domestic inventory pressure, subsequently driving a temporary rebound in futures prices.

Inventory Levels Under Control, Companies Step Up Pre-sales

High inventory remains a pressing issue for the PVC market. According to data released by Longzhong Information, domestic PVC social inventory stood at 1.2064 million tons by the end of January, up 2.45% week-on-week and 60.54% year-on-year. Inventories in East China reached 1.1488 million tons, up 2.66% week-on-week and 59.90% year-on-year. South China inventories stood at 57,500 tons, down 1.54% week-on-week but up 74.33% year-on-year. The inventory structure shows a pattern of “social inventory as the main component, supplemented by factory inventory.” Recently, PVC producers' inventories have increased by 11.63% compared to the same period last year. The seasonal inventory buildup poses manageable pressure for enterprises. Additionally, increased pre-sales before the Spring Festival, with some companies extending sales into the post-holiday period, have alleviated overall sales pressure. Consequently, the impact of current inventory levels on prices remains limited.

In summary, the PVC market faces a short-term reality of high supply, weak demand, and elevated inventories, countered by strong expectations of long-term capacity contraction and export rushes driven by export tax rebates. Post-holiday, rising temperatures and the resumption of infrastructure projects are expected to boost downstream operating rates. Should demand recovery exceed expectations, inventory drawdowns will commence. Overall, PVC prices are projected to fluctuate with an upward bias.

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