Northeast: The prices and profits of the PVC industry are at historically low levels. With the continuous evolution of the mercury-free and dual-carbon policies, it is expected to usher in a new cycle.

Northeast released a research report stating that since 2022, the domestic PVC industry has entered a new round of capacity release cycle, with industry inventory remaining high and PVC prices under pressure. Looking ahead, considering that the mainstream process of PVC, the Calcium Carbide method, as a high energy-consuming product, the actual capacity release intensity in the long-term planning is expected to slow down under the background of the continuous advancement of the dual-carbon policy. At the same time, under the transformation to mercury-free production, the Calcium Carbide method capacity is facing long-term adjustment pressure, and the elimination of small and medium-sized backward capacity under environmental and cost pressures is expected to gradually occur. From the demand side, with the slowing down of the real estate market and the increase in non-real estate demand such as exports and soft products, overall PVC demand is expected to continue to grow steadily. The PVC supply-demand pattern is expected to improve, and prices and profits are expected to gradually recover. The main points of view of Northeast are as follows: The chlor-alkali industry produces caustic soda (NaOH) and chlorine gas (Cl2) simultaneously through the electrolysis of saltwater, and PVC is the main downstream product that consumes chlorine gas. PVC is a polymer formed by the polymerization of vinyl chloride monomer by a free radical mechanism under the action of peroxides, azo compounds, light, and heat. It is a white, amorphous powder with no specific structure and is one of the world's top five general plastics. PVC has excellent resistance to chemical corrosion, electrical insulation, flame retardancy, lightweight, high strength, and ease of processing, and is widely used in industries such as industrial, agriculture, construction, power, electronics, medical, and automotive. Supply: In the short term, there is no new capacity added, and the pressure of oversupply is expected to ease under the background of the dual-carbon policy and the mercury-free policy. (1) From 2007 to 2013, domestic PVC production capacity grew rapidly, increasing from 15.2 million tons to 24.76 million tons, with a compound growth rate of 8.5%. After the structural adjustment from 2014 to 2016, the domestic PVC industry maintained a stable growth trend. By the end of 2025, the total domestic PVC production capacity reached 30.88 million tons, with an output of about 23 million tons. (2) From the perspective of industry competition, the overall concentration of the PVC industry has been increasing year by year, with the number of domestic PVC production companies reduced to 71, and the average capacity of enterprises increasing from 266,000 tons in 2013 to 435,000 tons in 2025. In terms of enterprise capacity distribution, the proportion of enterprises with a capacity of over 1 million tons increased significantly from 16.7% in 2020 to 27.8% in 2025. (3) From the perspective of industry capacity additions and eliminations, in the context of supply-side reforms starting in 2016, the introduction of the dual-carbon policy in 2020, and the current transformation to mercury-free production, China's PVC capacity will total 4.067 million tons from 2016 to 2025. Among them, 2.88 million tons of Calcium Carbide methods will be eliminated, and after 2020, all domestically eliminated PVC production capacity will be concentrated on the Calcium Carbide method. There is no planned capacity production in 2026, with potential new capacity of about 3.06 million tons from 2027 to 2028, and an estimated cumulative elimination of over 2 million tons from 2026 to 2030. Demand: Slowdown in real estate, soft product demand providing support 1) Hard products such as pipes account for about 60% of demand and are highly correlated with real estate construction. With the deep downturn in the domestic real estate cycle, downstream consumption has been weak, but the downward cycle has clearly slowed. 2) Soft products such as cable materials account for about 40% of demand and benefit from the support of domestic consumption promotion policies. The use of PVC in packaging, daily chemical products, and medical supplies has shown a steady growth trend, and in emerging application areas, with the development of new energy and new infrastructure fields, the application scenarios of PVC in photovoltaic backsheet membranes, wire sheaths, and rail transit interiors are gradually increasing. The demand for the wire and cable industry further increased, reaching 9% in 2025, driving the consumption of soft products. In addition, the overseas market has become an important increment: in 2025, China surpassed the United States for the first time to become the world's largest PVC exporter, with an annual export volume exceeding 3.8 million tons. The proportion of China's PVC exports to annual production has increased significantly from 3% in 2020 to 17% in 2025. Risk Warning: Downstream demand is lower than expected; fluctuations in raw material and energy costs.