Increase of 4.5% in PVC Import Tariff

According to changes in domestic industrial development and supply-demand conditions, within the scope of commitments made upon China's accession to the World Trade Organization, the Tariff Commission of the State Council issued an announcement on December 28, 2024, to raise the import tariffs on certain goods. Specifically, starting from January 1, 2025, the import tariffs on syrups and sugar-containing premixes, PVC, battery separators, and other goods will be adjusted. The "Import and Export Tariff of the People's Republic of China (2025)" clearly states that the import tax rate for PVC will cancel the 1% provisional tax rate policy and implement the Most-Favored-Nation rate of 5.5%, while the tariff rate for Japan will be set at 4.1%.

In the past decade, China's PVC import volume has remained within a 70-100 million ton fluctuation range. The data for 2024 is an estimate. Due to the insufficient upstream PVC supply chain for domestic ethylene-based PVC production enterprises, companies such as Suzhou Huasu, Formosa Plastics Ningbo, Taizhou Liancheng, and Guangzhou Dongcao have had to rely on domestic procurement or imported PVC for their PVC raw materials.

Historical data shows that before 2019, the import volume of PVC showed an upward trend, while from 2020 to 2023, the import volume remained stable. However, entering 2024, due to the continuous decline in downstream PVC prices and the firm prices of ethylene and PVC, corporate losses increased, leading to a more than 20% month-on-month decline in PVC import volume. Preliminary estimates indicate that the total PVC import volume for 2024 will reach 731,000 tons.

From the import data, the main source regions for PVC in China are Japan, followed by Taiwan and South Korea. All PVC imported from Taiwan is used for domestic production and processing, and all PVC produced is sold domestically. In contrast, PVC imported from Japan and South Korea is used not only for general trade but also partly imported for processing, with the produced PVC being exported. Notably, over half of the PVC imported from Japan is re-exported.

Japan is a major exporter of PVC in Asia, and there is demand for PVC imported from Japan among PVC powder and PVC paste resin production enterprises in Guangzhou Dongcao in South China, as well as in East and North China.

General trade remains the main method of PVC import. The PVC powder and PVC paste resin production enterprises in East and South China import PVC for processing and re-export. This trade model has changed little in recent years. However, due to the continuous decline in PVC prices, corporate profit margins have decreased, leading to a reduction in the general trade import volume of PVC in 2024. Data shows that the PVC import volume over the past decade has remained within the 70-100 million ton range, and correspondingly, the annual production volume of processed PVC is also within this range. After the tariff adjustment, the import tariff for PVC has generally increased by 4.5%, returning from the previous 1% provisional tax rate to the 5.5% Most-Favored-Nation rate. Based on the current PVC import price of $510-530 per ton, the import cost will increase by $22.95-23.85 per ton. Using the current exchange rate of 7.2993, the import cost per ton of PVC will increase by 167-174 RMB. For PVC imported from Japan, the agreement tariff rate is 4.1%, and with the tax rate increasing by 3.1%, the import cost per ton will increase by 115-120 RMB.

Among the currently operating PVC production enterprises in China, companies such as Suzhou Huasu, Formosa Plastics Ningbo, and Guangzhou Dongcao primarily rely on imported PVC, while Taizhou Liancheng mainly sources PVC domestically but also has records of PVC imports. This adjustment of the annual import tariff for PVC is expected to increase the import cost of PVC for the aforementioned enterprises, thereby increasing the production costs of downstream PVC.