Huachuang Securities: Ethylene-based PVC faces frequent force majeure due to rising raw material costs, focusing on domestic PVC production companies using calcium carbide method.

Huachuang Securities released a research report stating that the situation in the Middle East continues to ferment, and global PVC plants are experiencing frequent force majeure events. According to the domestic PVC industry capacity planning, there is no new capacity added in the industry in 2026, and industry expansion is becoming more rational. Considering that overseas production enterprises are gradually withdrawing due to various factors such as costs and demand, domestic production enterprises are expected to benefit fully. Combining the current geopolitical conflicts leading to a significant increase in energy costs in the short term, it is optimistic about the leading enterprise in the PVC industry with an integrated coal-electricity production chain. Key points of Huachuang Securities are as follows: Incident: The situation in the Middle East continues to ferment, and force majeure events are frequent in global PVC plants. According to Zhongsu Online, a plastic portal website, the global PVC industry is currently facing a wave of force majeure events, with many mainstream PVC production enterprises domestically and internationally issuing force majeure notices one after another, announcing the suspension or reduction of related plant production loads. According to statistics from Zhongsu Online, currently, approximately 5.2% of global PVC capacity is in a force majeure state. Geopolitical conflicts raise raw material costs Due to the impact of the Middle East geopolitical conflicts, international energy costs have significantly increased. According to Wind, as of March 23, the Brent oil price has risen from $72.48 per barrel before the conflict on February 27 to $99.94 per barrel, an increase of 37.9%. The rise in oil prices directly leads to an increase in ethylene prices, with the spot price of ethylene in Northeast Asia (CFR, median price) rising from $711 per ton on February 27 to $1451 per ton, an increase of 104.1%, further increasing the production cost of ethylene-based PVC. At the same time, disruptions in shipping in the Strait of Hormuz have caused freight rates to soar, with shipping costs from China to India doubling to over $100 per ton, indirectly increasing PVC export costs. Significant reduction in global PVC supply From the supply side, overseas PVC enterprises in the early stage have been affected by factors such as high costs, aging equipment, declining demand, and fierce competition from low-priced imported products, leading to a wave of closures. According to Zhongsu Lian, Vynova, a leading chlor-alkali and PVC producer in Europe, closed its 225,000-ton PVC production plant in the Netherlands at the end of November 2025, and its 320,000-ton production base in Germany is also expected to be shut down. Recently, against the background of further rising energy costs, force majeure events have been frequent in both domestic and overseas PVC enterprises. According to Sumi Technology, the combined PVC production capacity in Japan and South Korea currently impacted exceeds 3 million tons, with regional production reduction exceeding 20% in March. If the situation continues, the reduction in April may exceed 50%. According to Baichuan Yingfu, as of the week of March 20, the weekly operating rate of ethylene-based PVC in China has dropped to 63.59%, a decrease of 19.24% from before the conflict. Weak recovery in downstream demand, gradual destocking in factories On the demand side, affected by significant price fluctuations, PVC glove production enterprises have entered a period of price increases driven by rising raw material costs. In terms of inventory, as of the week of March 20, according to Baichuan Yingfu, domestic PVC factory inventory was 526,000 tons, a decrease of 35,600 tons from February 27; industry inventory was 1.8937 million tons, a decrease of 23,100 tons from February 27. Advantages of the calcium carbide process route gradually emerging From the perspective of production capacity layout, global PVC production capacity is highly concentrated in Northeast Asia, North America, and Europe. In the Northeast Asia region, China mainly uses the calcium carbide process (according to China Chemical Information Consultation, currently about 70% of PVC powder in China is produced using the calcium carbide process), while Japan, South Korea, and Taiwan mainly use the ethylene process, with a high dependence on ethylene raw materials. Affected by the recent Middle East situation, approximately 15% of global ethylene supply has been directly affected, further increasing transportation and cost pressures and pushing up product prices. Against this background, combined with China's energy structure of "more coal and less oil and gas", the cost advantage of PVC production enterprises using the calcium carbide process in coal-rich regions in western China is expected to be further highlighted. On the start-up side, according to Baichuan Yingfu, as of the week of March 20, the domestic calcium carbide PVC operating rate was 82.16%, an increase of 4.92% from before the conflict. In terms of price differences, as of March 24, according to Wind and Baichuan Yingfu, the price difference between domestic calcium carbide and ethylene-based PVC was about 1194 and 620.2 yuan per ton, respectively. Targeted recommendations Recommendations for companies to watch: Xinjiang Zhongtai Chemical (002092.SZ), Xinjiang Tianye (600075.SH), Inner Mongolia Junzheng Energy & Chemical Group (601216.SH), Shaanxi Beiyuan Chemical Industry Group (601568.SH), Anhui Hwasu Co., Ltd. (600935.SH), Tangshan Sanyou Chemical Industries (600409 .SH), Sichuan Xinjinlu Group (000510.SZ), etc. Risk warning Risks of significant fluctuations in raw material and product prices, safety and environmental risks, lower-than-expected demand from downstream industries, unexpected changes in industry policies, etc.