Analysis of China's PVC production capacity and imports
Stimulated by factors such as demand growth expectations and local government support, the domestic PVC industry's production capacity has expanded rapidly. In the case of a significant excess capacity last year, the current increase in production capacity has not yet been curbed.
Analysts said that while there is a large excess of domestic supplies while imported products are still pouring in, the operating rate of the industry is only 50%, and future exports are not optimistic. Some companies may be eliminated, and it is recommended to increase the industry entry threshold and environmental protection Standards, especially for expansion projects.
According to data provided by Galaxy Futures, domestic PVC production capacity was only 5.23 million tons in 2003, and by 2008 it had risen sharply to 15.81 million tons. The apparent domestic consumption of PVC in 2008 was only 9.27 million tons, with an overcapacity of 6.54 million tons.
Since 2009, the capacity of the PVC industry is still increasing. Ping An Shenma will increase by 300,000 tons in September, Shaanxi Beiyuan will increase by 200,000 tons at the end of the year, and Xinjiang Zhongtai will increase by 1.95 million tons. Du Yingting, an analyst of the PVC industry, said that it is expected that the supply in 2009 will reach 16.745 million tons and the apparent consumption will reach 10.64 million tons. The situation of overcapacity is very severe.
In addition, there are some projects that have been put into operation in 10 and 11 years, and the production capacity will continue to increase in the future. South Korea ’s Hanwha ’s 300,000-ton project is expected to be completed in 10 years, and Anhui Huasu ’s 1-million-ton project is expected to be commissioned in May 2011.
Analysts said that the expansion of domestic PVC production capacity is related to the expected growth of future demand, especially the growth of real estate investment on PVC demand, but the current expansion of production capacity has shown a swarm of characteristics, which has clearly exceeded demand.
In addition, the deeper reason is that local governments are very supportive of the development of such enterprises due to economic growth and employment considerations. For example, the transfer of land at a lower price is mainly reflected in the western region, which also leads to the expansion of PVC production capacity. It focuses on the characteristics of coal-power-rich regions in the west such as Inner Mongolia, Xinjiang, and Ningxia.
Analysts said that the production of 1 ton of PVC requires 8000 kWh of electricity. The expanded PVC project is concentrated in the integrated production of calcium carbide, and the cost of electricity is much lower than that in the east. This is one of the reasons why the company will choose the site of the expansion in the west. A Bohai Securities research report shows that calcium carbide accounts for 72% of the cost of calcium carbide, and the total cost of calcium carbide accounts for 90% of electricity and coke.
The more important reason is the support of local governments. Du Yingting said that when PVC prices were relatively low in March and April, it was difficult for companies in the western region to recover costs, but some regions took measures such as tax reductions to keep these companies operating at a higher operating rate.
Despite the expansion of PVC production capacity in the eastern region, such as some companies moving from urban areas to industrial parks to expand production capacity, some companies have gradually abandoned PVC business, such as Jiangshan. Shandong Province, a large PVC province in the eastern region, has also restricted its production capacity. According to the province's 11th Five-Year Plan, PVC production capacity will no longer expand.
Grim export situation
Due to the overcapacity of the industry, the China Chlor-Alkali Industry Association predicts that the operating rate in 2009 is expected to be 50%, and the number of idle enterprises will reach 17. In the case of import growth and unfavorable exports, excess capacity is even more prominent. Galaxy Futures researcher Yuan Jing said that lower crude oil prices in the first half of the year led to lower international PVC prices, and imported PVC has a price advantage. From January to July, PVC imports have always been greater than exports; imports have been increasing year-on-year, while exports have been falling year-on-year.
In terms of export, analysts said that the internationally-used production process is the ethylene method, and calcium carbide method PVC products need to be cheaper 400-500 yuan / ton to be exported, while Europe and the United States and other countries are more concerned about the product's environmental protection, energy saving, low carbon characteristics, It is very difficult for products to enter these markets. In the future, export will face greater resistance in this regard.
In addition, calcium carbide companies in the west only have cost advantages under the condition of higher oil prices and local subsidies. Although oil prices are expected to rise, we need to be alert to the low-cost natural gas-to-ethylene production in the Middle East, which will greatly reduce the production cost of ethylene-based PVC. After the expansion of production scale in the future, it will cause a large impact on the calcium carbide process, making the calcium carbide process Cost advantage.
In order to promote the healthy development of the industry, analysts believe that the requirements for corporate entry barriers and environmental standards should be raised, especially for expansion projects, and the blind expansion of production capacity should be curbed. However, it may be difficult to shut down backward production capacity through government means, and it is necessary to gradually eliminate backward production through market competition.
News reprinted from China Pipeline Business Network http://www.chinapipe.net/analysis/display.asp?analysis_id=3208