Since October 2004, the highly volatile domestic PVC market has suddenly changed drastically, and prices have dropped sharply. From the highest point of more than 9,100 yuan per ton, the price has dropped to 6500 to 7,000 yuan per ton. Ton 5500 ~ 6000 yuan, the price has continued to slump has not yet risen. When this change is mentioned, people in the industry will use the same word invariably: self-efficiency.
Blind expansion of production capacity In the recent seminar on promoting the development of PVC and calcium carbide industry held in Shihezi City, Xinjiang, China National Chlor-alkali Industry Association general secretary Zhang Guomin analyzed that although China is a major producer of PVC, it is over-expected due to market demand. The supply is still relatively tight. In 2004, the output of PVC in China reached 5.03 million tons, but the consumption was 7 million tons. The gap is huge. Driven by profits, various regions have launched PVC projects. In addition, in 2003, China imposed anti-dumping measures on products from the United States, South Korea, Japan, Russia, and China’s Taiwan region, and domestic production companies also got a breathing space.
According to statistics from the China Chlor-Alkali Industry Association and the National Development and Reform Commission, China's polyvinyl chloride production capacity has grown at an average annual rate of over 50% in the past two years. The number of companies has also increased from 70 to 90, with a total capacity of more than 9.8 million tons, and it is expected to increase to 11.5 million tons by the end of 2006. However, the expected consumption in 2005 was only about 8 million tons, and there was a large excess of production capacity.
Particular attention should be paid to factors such as raw materials, technology, energy, etc. The huge production capacity has not yet been released, but the construction boom has not yet cooled. Many regions and enterprises have ignored the industrial situation and have proposed to double their production capacity in 3 to 5 years. Many areas in the Midwest are planning to build production bases.
Competing for low-level processes However, in view of the new projects, the vast majority are small-scale production. The problem of low-level duplicate construction is serious and competitiveness is low. At present, there are polyvinyl chloride production plants in 26 provinces and regions such as Shandong, Shanxi and Inner Mongolia. The production capacity of more than 90 companies is 100,000 to 200,000 tons, and 200,000 tons or more are 32% and 35% respectively.
In addition, the process structure of the PVC industry is relatively single. According to Zhang Guomin, the polyvinyl chloride industry currently has three processes: ethylene, calcium carbide and dichloroethane cracking. The dichloroethane cracking method is more advanced and the use of raw materials depends on imports. Chinese enterprises rarely use them. The ethylene method is economical and mature and is adopted by most foreign companies. The ethylene method uses petroleum as raw material, large-scale production, high product quality, low energy consumption, and low pollution. Large enterprises such as Qilu Petrochemical in the eastern region mainly use the ethylene method because of tight oil supply, high prices, and high production costs. The production of calcium carbide in the central and western provinces of Shanxi, Inner Mongolia and other provinces is large, and the company mainly adopts the calcium carbide method. The calcium carbide method has a lower production cost per ton than that of the ethylene method by about 1,000 yuan. Therefore, the rate of adoption by enterprises has been rising year by year. In 2003 and 2004, it has reached 56% and 70% respectively. Among the new production capacity since 2005, the calcium carbide method accounts for 60%, and the proportion will continue to increase in the future. However, although the calcium carbide method can ease pressure on oil supply and reduce costs, in addition to low product quality, the calcium carbide method has high energy consumption and pollution. At present, calcium carbide has been included in the key industries of macro-control.
Low prices hit the market The sharp increase in production capacity led to a rise in output. To compete for the market, companies compete for prices. Since 2005, enterprises in Inner Mongolia, Gansu, and other provinces and regions have hit the market at a price of about 5,800 yuan per ton, while Shanxi companies have sold products at 5,500 yuan per ton. This has caused the prices of South China and East China markets to fall sharply, and both have fallen by more than 2,000 yuan. /Ton. Most enterprises in East China and South China use ethylene production, which has high product costs and can only reduce the operating rate. At the same time, the tight transport of coal, electricity and oil led to an increase in production costs. Chlorine and electricity prices rose sharply from previous years, resulting in an increase in product costs by about 9% over the same period of previous years, and a large number of companies faced losses.
Relying on policy reform According to analysis by industry insiders such as the Deputy Secretary-General of the China Petroleum and Chemical Industry Association, Sun Weishan, the pressure on PVC enterprises in China is increasing day by day. In addition to civil unrest, foreign investment has set up factories in China in recent years in an effort to obtain a share. This year alone, projects such as Japan’s Tosoh Group and South Korea’s LG Company started construction in Guangzhou, Tianjin and Ningbo respectively, with a designed capacity of 300,000 tons to 350,000 tons, with large scale and advanced technology.
Of course, domestic companies still have the opportunity to stand up. The demand for PVC in China will remain strong in the coming few years. Experts predict that in 2005, the domestic PVC production will be around 6.2 million tons, and the market gap will still be around 1.7 million tons. The demand for PVC in China will remain strong in the coming few years. At present, it is important for the government to introduce measures to strengthen industry consolidation as soon as possible, eliminate small-scale, poorly-processed, low-quality, low-grade companies, support large-scale, promising companies, introduce and promote advanced technologies, and promote industrial upgrading.
In the long run, the diversification of the PVC business process is also urgently needed. Although the cost of the calcium carbide method is low, it has high energy consumption and large pollution, and it must be rectified as soon as possible, otherwise it will be difficult for the PVC industry to achieve sustained and healthy development. The state should actively introduce and promote more advanced dichloroethane cracking production processes, optimize the process structure, and reduce industrial risks.
Blind expansion of production capacity In the recent seminar on promoting the development of PVC and calcium carbide industry held in Shihezi City, Xinjiang, China National Chlor-alkali Industry Association general secretary Zhang Guomin analyzed that although China is a major producer of PVC, it is over-expected due to market demand. The supply is still relatively tight. In 2004, the output of PVC in China reached 5.03 million tons, but the consumption was 7 million tons. The gap is huge. Driven by profits, various regions have launched PVC projects. In addition, in 2003, China imposed anti-dumping measures on products from the United States, South Korea, Japan, Russia, and China’s Taiwan region, and domestic production companies also got a breathing space.
According to statistics from the China Chlor-Alkali Industry Association and the National Development and Reform Commission, China's polyvinyl chloride production capacity has grown at an average annual rate of over 50% in the past two years. The number of companies has also increased from 70 to 90, with a total capacity of more than 9.8 million tons, and it is expected to increase to 11.5 million tons by the end of 2006. However, the expected consumption in 2005 was only about 8 million tons, and there was a large excess of production capacity.
Particular attention should be paid to factors such as raw materials, technology, energy, etc. The huge production capacity has not yet been released, but the construction boom has not yet cooled. Many regions and enterprises have ignored the industrial situation and have proposed to double their production capacity in 3 to 5 years. Many areas in the Midwest are planning to build production bases.
Competing for low-level processes However, in view of the new projects, the vast majority are small-scale production. The problem of low-level duplicate construction is serious and competitiveness is low. At present, there are polyvinyl chloride production plants in 26 provinces and regions such as Shandong, Shanxi and Inner Mongolia. The production capacity of more than 90 companies is 100,000 to 200,000 tons, and 200,000 tons or more are 32% and 35% respectively.
In addition, the process structure of the PVC industry is relatively single. According to Zhang Guomin, the polyvinyl chloride industry currently has three processes: ethylene, calcium carbide and dichloroethane cracking. The dichloroethane cracking method is more advanced and the use of raw materials depends on imports. Chinese enterprises rarely use them. The ethylene method is economical and mature and is adopted by most foreign companies. The ethylene method uses petroleum as raw material, large-scale production, high product quality, low energy consumption, and low pollution. Large enterprises such as Qilu Petrochemical in the eastern region mainly use the ethylene method because of tight oil supply, high prices, and high production costs. The production of calcium carbide in the central and western provinces of Shanxi, Inner Mongolia and other provinces is large, and the company mainly adopts the calcium carbide method. The calcium carbide method has a lower production cost per ton than that of the ethylene method by about 1,000 yuan. Therefore, the rate of adoption by enterprises has been rising year by year. In 2003 and 2004, it has reached 56% and 70% respectively. Among the new production capacity since 2005, the calcium carbide method accounts for 60%, and the proportion will continue to increase in the future. However, although the calcium carbide method can ease pressure on oil supply and reduce costs, in addition to low product quality, the calcium carbide method has high energy consumption and pollution. At present, calcium carbide has been included in the key industries of macro-control.
Low prices hit the market The sharp increase in production capacity led to a rise in output. To compete for the market, companies compete for prices. Since 2005, enterprises in Inner Mongolia, Gansu, and other provinces and regions have hit the market at a price of about 5,800 yuan per ton, while Shanxi companies have sold products at 5,500 yuan per ton. This has caused the prices of South China and East China markets to fall sharply, and both have fallen by more than 2,000 yuan. /Ton. Most enterprises in East China and South China use ethylene production, which has high product costs and can only reduce the operating rate. At the same time, the tight transport of coal, electricity and oil led to an increase in production costs. Chlorine and electricity prices rose sharply from previous years, resulting in an increase in product costs by about 9% over the same period of previous years, and a large number of companies faced losses.
Relying on policy reform According to analysis by industry insiders such as the Deputy Secretary-General of the China Petroleum and Chemical Industry Association, Sun Weishan, the pressure on PVC enterprises in China is increasing day by day. In addition to civil unrest, foreign investment has set up factories in China in recent years in an effort to obtain a share. This year alone, projects such as Japan’s Tosoh Group and South Korea’s LG Company started construction in Guangzhou, Tianjin and Ningbo respectively, with a designed capacity of 300,000 tons to 350,000 tons, with large scale and advanced technology.
Of course, domestic companies still have the opportunity to stand up. The demand for PVC in China will remain strong in the coming few years. Experts predict that in 2005, the domestic PVC production will be around 6.2 million tons, and the market gap will still be around 1.7 million tons. The demand for PVC in China will remain strong in the coming few years. At present, it is important for the government to introduce measures to strengthen industry consolidation as soon as possible, eliminate small-scale, poorly-processed, low-quality, low-grade companies, support large-scale, promising companies, introduce and promote advanced technologies, and promote industrial upgrading.
In the long run, the diversification of the PVC business process is also urgently needed. Although the cost of the calcium carbide method is low, it has high energy consumption and large pollution, and it must be rectified as soon as possible, otherwise it will be difficult for the PVC industry to achieve sustained and healthy development. The state should actively introduce and promote more advanced dichloroethane cracking production processes, optimize the process structure, and reduce industrial risks.