1. Supply Side: Capacity Expansion Continues

In 2025, the trend of capacity expansion in China's PVC industry continued, with the total national PVC capacity expected to approach 30 million tons by the end of the year. New capacity is mainly distributed in North China, Northwest China, and South China. Among them, the production facilities of Shaanxi Jintai and Xinpu Chemical have been successfully put into operation; Tianjin Bohua's 400,000-ton, Fujian Wanhua's 500,000-ton, and Qingdao Haiwan's 200,000-ton facilities are scheduled to officially start operation in July. Although the total new capacity in 2025 will reach 2.2-3 million tons, the pace of capacity release shows a significant characteristic of "slow at the beginning and fast at the end": only the new capacity of Shaanxi Jintai and Xinpu Chemical was implemented in the first half of the year, while the new capacity in the second half of the year accounts for more than 50% of the total annual increase, and PVC production is expected to reach a new historical high from October to December. In terms of production technology, ethylene-based plants have become the main force in this capacity expansion.

2. High Operating Rates of PVC Enterprises

In the first half of 2025, the capacity utilization rate of PVC production facilities mostly remained above 78%, and in some periods, such as January and February, the operating rate even climbed to over 80%. The main reason for this phenomenon is that the overall profit performance of chlor-alkali-PVC integrated plants is still acceptable. Even if the PVC production segment incurs losses, supported by the profits from the caustic soda business, PVC producers will not easily reduce production load, thus keeping the industry's operating rate at a high level and driving PVC output to remain at a high level. It is estimated that domestic PVC output from January to June was approximately 12.02 million tons, a year-on-year increase of 3.01%.

3. Demand Constrained by the Traditional Off-Season

In the downstream demand structure of PVC, approximately 80% of the demand is closely related to the real estate industry. Affected by the continued sluggishness of the real estate market, the demand for PVC in the field of rigid products such as pipes and profiles remains weak. Despite the introduction of several favorable real estate policies in China and signs of recovery in the secondary housing market, these positive signals have not yet effectively translated into PVC end-user demand, with new housing starts remaining weak. The operating rate of PVC pipe and profile manufacturers has remained low for an extended period. As of June 6th, the operating rate of sample PVC pipe manufacturers was 44.38%, a year-on-year decrease of 6.8 percentage points; the operating rate of sample PVC profile manufacturers was 38.05%, a year-on-year decrease of 13 percentage points. Affected by persistently weak end-user orders and the approaching traditional off-season, downstream enterprises are not showing strong enthusiasm for purchasing PVC raw materials. Demand in other sectors such as flexible PVC products remains stable, insufficient to compensate for the decline in demand from the real estate sector. Regarding exports, although BIS certification has been temporarily postponed to late June, it still brings significant uncertainty to PVC exports. Furthermore, the arrival of the rainy season in Southeast Asia further suppresses local demand for PVC imports. Overall, both domestic and international demand for PVC lacks significant growth, and a substantial increase in demand is unlikely in the short term.

In summary, the weak price trend in the PVC market is unlikely to change in the short term. On the supply side, new production capacity will continue to be released, and the operating rate of upstream PVC producers remains high, making it difficult to reverse the ample supply situation in the short term. On the demand side, the recovery of the real estate market will take time, and exports face many uncertainties, so the weak demand situation will persist. It is expected that in the near future, the PVC market will continue to operate amid the core contradiction of ample supply and weak demand, and prices will likely continue to fluctuate at low levels. The mainstream price of PVC in East China is expected to be around 4660 yuan/ton in June.