Abstract: With the development of the domestic Pvc Resin industry, China has gradually developed from a net importer to a net exporter. The main reasons for the growth of China's PVC Resin exports in the past two years are the weak domestic demand of enterprises actively seeking export channels and the expiration of India's anti-dumping policies to promote exports. Although exports account for nearly 10% of the total consumption by 2022, downstream demand for PVC powder in China is still dominated by domestic demand, supplemented by exports. The improvement in exports has played a more supportive role than a trend driven one, as seen in recent July August this year. In the future, India will continue to be the main exporter of PVC powder in China, playing a certain role in supporting domestic prices.
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Evolution of import and export patterns of PVC powder
The import and export pattern of domestic PVC resin has undergone several changes. (1) From 2003 to 2008, with the expansion of domestic production capacity, imports decreased year by year, with an average annual decline rate of over 10% after 2005, while exports continued to increase; (2) From 2008 to 2009, the financial crisis led to a decline in crude oil prices, leading to a significant decline in the cost of ethylene PVC production abroad, resulting in a significant increase in import volume and a decline in exports; (3) From 2010 to 2016, with the improvement of domestic PVC production and quality, the domestic self-sufficiency rate gradually increased, and exports exceeded 1 million tons for the first time in 2014. In 2015, the international economic recovery was slow, and exports began to decline. (4) From 2017 to 2020, due to India's anti-dumping duty on Chinese PVC resin in August 2016 and the increase in the average price of domestic PVC resin, enterprises turned to domestic sales, and exports showed a downward trend. In 2019, due to the impact of China US trade relations, exports fell to a new low in recent years. In 2020, the epidemic affected exports and imports increased in stages. (5) Since 2021, there has been a supply shortage overseas due to the impact of the epidemic and the cold wave weather in the United States, resulting in a surge in domestic PVC powder export orders. In 2021, the export volume reached 1.754 million tons, a year-on-year increase of 179%, and the import volume was 399000 tons, a decrease of 57.9%. On January 31, 2022, India's anti-dumping policy against China's PVC expired, enhancing its export advantage. In 2022, India accounted for 29.63% of China's total exports, an increase of 12.3% compared to the previous year. At the same time, due to weak domestic demand, production enterprises increased their overseas sales channels.
In the first half of 2023, PVC exports significantly increased, and the impact of exports on domestic market supply and demand was more significant compared to imports. Since the opening of the export arbitrage window in December 2022, overseas procurement enthusiasm has been high, and PVC production enterprises have increased their export orders. Due to the lag between export order receiving and order delivery, PVC exports increased significantly year-on-year and month on month from January to March this year. From late February to mid June 2023, the purchasing enthusiasm of foreign customers significantly weakened, reflected in a significant decrease in export delivery volume in the second quarter. The export volume of PVC resin in the first half of 2023 was 1.086 million tons, a year-on-year decrease of 156200 tons or 12.57%. But the export window reopened in June, and the export volume increased from July to August. It is expected that exports will increase year-on-year in the third quarter.
In the past, the proportion of PVC resin exports to total demand was not significant, and it was not until 2021 that it accounted for nearly 8%, and the proportion has been continuously increasing in the past two years. From the perspective of historical price trends, although exports increased month on month in 2014, 2016, and 2017, the price trend is more related to domestic fundamentals. However, starting from 2021, as the proportion of exports increases, the impact of exports on the market will be more significant. In early 2021, under the influence of the Texas cold wave, domestic exports increased, stimulating domestic prices to rise. In October 2021, with the decline of the coal chemical industry sector and the downward trend of the real estate cycle, Under the transformation of supply and demand pattern, PVC powder has entered a downward trend as a whole. The exports in the first half of 2022 have played a certain supporting role in domestic prices. In early 2023 and June, there was a certain rebound in PVC resin due to the combined effects of macroeconomic policy expectations and exports. Overall, in the past two years, China has still faced a pattern of oversupply. With the relaxation of overseas policies, exports have played a more important role in downstream domestic consumption, and export orders have a certain guiding role for the phased market.
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Analysis of Factors Influencing the Import and Export of PVC Resin
1. Performance of major import and export countries
From the perspective of source, domestic imported goods mainly come from the United States, Taiwan, and Japan. However, as domestic supply increases, the proportion and impact of imported goods are becoming smaller and smaller. India, Russia and Southeast Asia (including Malaysia, Vietnam, Thailand, Myanmar and other countries) rank top in domestic PVC powder export. In recent years, with China's implementation of the "the Belt and Road" policy, the market demand of Central Asia and Middle East countries (including Uzbekistan, Kazakhstan, Türkiye, Egypt) has also brought new opportunities for China's PVC resin export. At present, India is the world's largest PVC importer and China's most important PVC resin export trading partner. Previously, due to India's anti-dumping policy, the export quantity of Chinese PVC powder to India was restricted. With the expiration of India's anti-dumping policy on Chinese PVC in 2022, the quantity of PVC exported from China to India significantly increased. The quantity of PVC powder exported from China to India from January to July 2023 was 627100 tons, which has exceeded the level of the entire year in 2022 and accounts for nearly 50% of the total domestic exports during the same period.
India is a major exporter of PVC powder in China, and its market performance has a significant impact on the domestic export market. At present, India's existing PVC resin production capacity is about 1.6 million tons. India's Adani Group plans to invest 2 million tons of carbide PVC resin to be put into production around 2026. Therefore, India's production capacity will not be expanded in the next 2-3 years, while India's annual demand is about 4 million tons, resulting in greater dependence on India's PVC market. From the perspective of import structure, China, Taiwan, China, Japan and South Korea have always been the main sources of India's PVC imports, After India imposed anti-dumping duties on China, this demand turned to Taiwan, China, Japan, South Korea and other places. Japan once occupied the first place in India's PVC powder import. However, with the end of anti-dumping in 2022, China will probably become the main importer of India for a long time. In addition, the United States has an export scale of 2-3 million tons in the international market, and its relatively low cost makes it the most direct competitor of China in the Indian PVC market.
From the perspective of transportation mode, the main trade mode for domestic export of PVC resin is general trade, which far exceeds the quantity exported through other methods such as processing trade, indicating that domestic PVC powder production enterprises are actively exploring the international market. In addition, the main customs for PVC exports include Tianjin, Urumqi, Shanghai, Ningbo, etc. Among them, the largest number of exports are through Tianjin customs, accounting for about 50%.
From a seasonal perspective, the seasonal differences in imports are not significant. The increase in imports from June to August 2020 was mainly affected by the epidemic, with an average monthly import of around 30000 to 50000 tons. After 2021, the average monthly import continued to decrease. The seasonality of exports is more obvious, as can be seen from the number of export orders signed by production enterprises. In the first half of the year, exports were more than in the second half, mainly affected by the weak and peak overseas demand season. For example, in 2021 and 2022, the rainy season in Southeast Asia and India is in June, and the demand for PVC powder is relatively small. Therefore, the export volume of PVC powder in the second half of the year decreased relatively significantly compared to the first half of the year. Overall, in recent years, the domestic PVC market has been in a pattern of loose supply and demand, with limited import sources and limited impact on the domestic market. As the proportion of exports in consumption increases, the role of exports has become more important. However, due to the fact that PVC downstream is mainly related to domestic real estate, most exports only have a phased trend, and the trend still depends on domestic demand, Therefore, the seasonal performance of domestic demand may have a higher impact on the PVC market than the seasonal performance of imports and exports.
2. Import and export policies
At present, the most obvious policy that has an impact on domestic imports and exports is anti-dumping policy, including domestic to overseas and overseas to domestic. The following are several important anti-dumping policies.
From the perspective of imports, before 2003, domestic PVC consumption had a high degree of external dependence, and foreign PVC products had a significant impact on domestic enterprises. In order to protect domestic enterprises, the country implemented anti-dumping policies on overseas imported PVC. On September 29, 2003, the Chinese Ministry of Commerce decided to impose anti-dumping measures on imported polyvinyl chloride originating from the United States, South Korea, Japan, Russia, and Taiwan for a period of five years. On September 29, 2009, the Ministry of Commerce decided to extend anti-dumping measures against imported polyvinyl chloride originating in the United States, South Korea, Japan, Russia, and Taiwan for a period of five years. On September 28, 2015, the Ministry of Commerce continued to extend anti-dumping measures against imported polyvinyl chloride originating in the United States, South Korea, Japan, and Taiwan for a period of three years. The anti-dumping measures against imported polyvinyl chloride originating in Russia were terminated from September 28, 2015. After suppressing imports, the domestic industry has achieved a good development environment, especially in 2015 when the supply side reform eliminated outdated production capacity. The industry has entered a mature stage of development, and the proportion of imports has gradually decreased.
From the perspective of exports, since 2008, domestic PVC production and exports have grown rapidly, and international trade frictions have gradually increased. On August 28, 2008, Brazil imposed anti-dumping duties on PVC imports from China for a period of 5 years. On July 27, 2011, the Indian Ministry of Commerce and Industry made a preliminary ruling on the anti-dumping case of imported PVC adhesive originating from China, and ultimately imposed anti-dumping duties on Chinese PVC resin products for a period of 5 years. On July 16, 2014, Argentina decided to impose anti-dumping duties on PVC profiles originating in China for manufacturing doors, windows, and partitions, with a validity period of 5 years. On March 23, 2015, Brazil launched an anti-dumping investigation against PVC canvas originating in China. On August 18, 2015, India decided to extend its anti-dumping measures against China's PVC film for one year until July 27, 2016. The biggest impact of the policy is that in August 2016, the Indian Ministry of Commerce and Industry imposed anti-dumping duties on Chinese PVC and other products, which seriously hindered the export of Chinese PVC products. By January 31, 2022, the Indian Ministry of Commerce and Industry's anti-dumping policy against Chinese PVC had expired, greatly enhancing the advantages of Chinese PVC exporting countries. Overall, with the increase in domestic exports, anti-dumping measures against Chinese PVC exports have been increasing in recent years. However, most importantly, in 2022, with the expiration of India's anti-dumping policies, Chinese exports have significantly increased year-on-year, and Indian imports have a significant impact on the domestic export market.
3. Import and export profits
In the next few years, China will still be in a pattern of oversupply, and the expected import volume is relatively small. This chapter mainly discusses export profits. The existence of export arbitrage space is one of the sufficient conditions for export growth. Since 2021, there have been many opportunities for export arbitrage, which reflects the significant increase in export volume from 2021 to 2023. However, exports are also affected by other factors, such as whether domestic and foreign sources are in short supply, the weak and peak season of overseas demand, and the introduction of anti-dumping policies overseas. Among them, the main reason for the decrease in overseas supply in 2021 was due to cold weather conditions, 2022-2023 is the stimulus brought by the expiration of India's anti-dumping policy.
In the short term, in July 2023, due to the maintenance and temporary shutdown of some foreign PVC plants, overseas supply was temporarily tight, while the domestic PVC market prices were low, and export arbitrage space was expanded. The overall situation of upstream production enterprises' export orders improved compared to the previous period, especially the export order volume of some ethylene process enterprises significantly increased. The increase in exports drove up domestic PVC prices, but by August, overseas plants resumed operation, Export orders and prices have declined, but the backlog is still close to 200000 tons. With the gradual delivery of export orders, it is expected that domestic PVC exports from August to September will increase compared to the month on month in July. In the third quarter of this year, exports will show anti seasonal growth, and it is expected that exports will increase in the second half of 2023 compared to 2022. However, it is also necessary to track whether India has made up inventory in advance. Based on previous years' patterns, the third quarter is the off-season for domestic exports, There will be a certain increase in exports in the fourth quarter.
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summary
With the development of the domestic PVC industry, China has developed from a net importer to a net exporter, with exports accounting for nearly 10% of total consumption by 2022. In the past two years, the growth of PVC exports in China has been mainly affected by two factors. Firstly, the domestic real estate downturn has led to weak domestic demand, and production enterprises are actively seeking export channels in a situation of oversupply; Secondly, the expiration of India's anti-dumping policies as a major demand country has promoted the export of PVC in China. Overall, domestic PVC downstream demand is still dominated by domestic demand, supplemented by exports. The improvement in exports is more of a supportive effect on the market, rather than a trend driven one. Especially from the performance of 2022-2023, it can be seen that the sustainability of the rebound market brought by export support is not strong in the downward trend of domestic PVC, and the recent July August market is also the same. From the perspective of overseas demand, India, as a major agricultural country, has about 60% of its PVC demand from agricultural pipelines. However, its domestic production capacity is currently lower than the total demand, and it still highly relies on imports from overseas. In the future, India will continue to be the main exporter of PVC in China, and exporting to India will play a certain role in supporting domestic prices. In the next few years, the expansion of PVC production in the world will mainly be concentrated in China, and most of it will be ethylene based PVC. Despite the fact that the domestic real estate cycle has not yet reversed, it is likely that China will still be in the stage of overcapacity, and its excess production will be dumped and impact the global PVC market. Therefore, the policy side of major import and export countries in the future is also something we need to pay attention to.
