Northeast Securities: Prices and profits in the PVC industry are at historically low levels and are expected to usher in a new cycle as mercury-free and dual-carbon policies continue to evolve

The Zhitong Finance App learned that Northeast Securities released a research report saying that since 2022, the domestic PVC industry has ushered in a new cycle of production capacity release. Industry inventories remain high, and PVC prices are also falling under pressure. Looking forward to the future, considering the mainstream process of calcium carbide PVC as a high-energy product, the actual investment in long-term planned production capacity is expected to slow down in the context of the continuous promotion of the dual-carbon policy. At the same time, calcium carbide production capacity is expected to be adjusted for a long time under the mercury-free transition. From the demand side, as the decline in real estate slows down and demand for non-real estate such as exports and soft products increases, the overall demand for PVC is expected to grow steadily, and the PVC supply and demand pattern is expected to gradually improve, and prices and profits are expected to gradually recover.

The main views of Northeast Securities are as follows:

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PVC is a polymer made by polymerizing vinyl chloride monomer with an initiator such as peroxide or azo compounds or according to the action of light or heat. It is a white powder with an amorphous structure. It is one of the top five general-purpose plastics in the world. It has excellent chemical resistance, electrical insulation, flame retardancy, light weight, high strength, and easy processing, and is widely used in industry, agriculture, construction, electricity, electronics, medicine, automobiles, etc.

Supply: There is no new production capacity in the short term. The pressure of oversupply is expected to ease with the dual carbon background and the promotion of mercury-free policies

(1) Domestic PVC production capacity achieved rapid growth from 2007 to 2013. The production capacity increased from 15.2 million tons to 24.76 million tons, and the compound growth rate reached 8.5%. After experiencing structural adjustments from 2014 to 2016, the overall domestic PVC growth trend was steady. By the end of 2025, the total domestic PVC production capacity reached 30.88 million tons, with an output of about 23 million tons; (2) Judging from the industry competition pattern, the overall concentration of the PVC industry is increasing year by year. Currently, the number of domestic PVC manufacturers has dropped to 71. 266,000 tons in 2013 increased to 435,000 tons in 2025. Judging from the distribution of enterprise production capacity, the share of production capacity of enterprises with a scale of 1 million tons or more increased dramatically from 16.7% in 2020 to 27.8% in 2025; (3) In terms of new and phased out production capacity in the industry, in the context of supply-side reforms initiated in 2016, proposed a dual-carbon policy in 2020, and the current mercury-free transition, China withdrew a total of 4.067 million tons from 2016-2025, of which 2.88 million tons were withdrawn from China after 2020. All PVC withdrawal capacity is concentrated in the calcium carbide method; the industry has no planned production capacity to be put into operation in 2026. The potential increase is about 3.06 million tons from 2027 to 2028, and the cumulative withdrawal of more than 2 million tons is expected from 2026-2030.

Demand: Real estate decline is slowing down, and demand for soft products forms support

1) Demand for hard products such as pipes accounts for about 60%, and is highly related to real estate construction. Due to the deep decline in the domestic real estate cycle, downstream consumption performance is poor, but the downward cycle has clearly slowed down; 2) Demand for soft products such as cables accounts for about 40%, benefiting from domestic consumer promotion policies. The use of PVC in packaging, daily chemicals and medical supplies is showing a steady growth trend. Emerging application areas. With the development of new energy and new infrastructure, polyvinyl chloride is gradually being applied in emerging application scenarios such as photovoltaic backsheets, wire jackets, and rail transit interiors Increased, and the share of demand in the wire and cable industry increased Increased, with demand accounting for 9% in 2025, driving an increase in consumption of soft products. Furthermore, overseas markets have become an important increase: in 2025, for the first time, China surpassed the US to become the world's largest PVC exporter, with an annual export volume of more than 3.8 million tons. The share of China's PVC exports in annual output increased dramatically from 3% in 2020 to 17% in 2025.

Risk warning: downstream demand falls short of expectations; risk of fluctuations in raw materials and energy costs