2025 PVC Prices Decline Due to Capacity Expansion & Supply-Demand Imbalance, 2026 May See a Recovery

December 31st news

In 2025, China's PVC market, under the backdrop of capacity expansion and supply-demand imbalance, exhibited a triple characteristic of "high supply, high inventory, and weak demand," with prices hitting a new low for the year before fluctuating and bottoming out. According to monitoring, the total price decrease for SG-5 type using the calcium carbide method was 11% throughout the year.

I. 2025 Market Review: Overall Downward Trend with Mid-Year Rebound

In the first half of the year, due to the concentrated release of new production capacity, the supply-demand contradiction showed a gradually increasing trend, and PVC prices continued to fluctuate and decline. According to monitoring, the price of calcium carbide method SG-5 type PVC in China fell from nearly 5000 yuan to around 4500 yuan in the first half of the year.

June to late July is the only period in the year when PVC prices rise, mainly due to supply contraction and inventory depletion, leading to a short-term imbalance between supply and demand. This is compounded by policy expectations and futures speculation, resulting in a temporary rebound within the overall "low-range fluctuation" pattern for the year. By late July, PVC prices reach their annual high, breaking the 5,000 yuan mark.

At the end of July, as maintenance facilities gradually resumed operations, exports remained weak, and terminal demand returned to rationality, PVC prices re-entered a downward trend. There was a slight rebound at the end of the year, mainly relying on policy support and the recovery of futures sentiment, but the fundamental support remained weak.

II. Supply-Demand Dynamics: Capacity Expansion Reaches Completion & Sluggish Demand Exacerbate the Supply-Demand Contradiction

1. Supply side: Concentrated production expansion & high inventory

First, in 2025, PVC’s new production capacity will reach 2.2 million tons (a net increase of 2.05 million tons), bringing the total capacity at year-end to over 29.93 million tons—a year-on-year increase of 7.35%. The share of ethylene-based processes will rise to 28%, marking the industry’s official exit from the period of rapid capacity expansion.

Table: Statistics of New PVC Production Capacity in China for 2025

Second, the operating rate remained at a medium-to-high level: the average annual operating rate was maintained between 77% and 78%. According to monitoring, the operating rate at the end of the year was approximately 77%, which, although lower than the previous high, saw a limited decline due to constraints on safe operation and annual production targets. Only some small and medium-sized, high-cost enterprises reduced their loads passively due to losses, and old facilities in Xinjiang and Shandong began to exit sporadically.

Finally, production has steadily increased: the cumulative production from January to November was 2.232 million tons, with a year-on-year growth of 4.35%. It is estimated that the annual production will be 2.45 million tons, with a year-on-year growth of 4.52%. The production growth rate of the ethylene process reached as high as 13%, becoming the core of the supply increase.

Figure: China’s PVC Production Statistics for 2025

2. Demand side: Weak demand—exports show slight improvement.

In 2025, domestic demand for PVC will remain weak: 60% of downstream PVC applications depend on the real estate sector. From January to November 2025, the area of newly started residential construction fell by 19.9% year-on-year to 392 million square meters, and real estate development investment declined by 15.9% year-on-year. As a result, the utilization rates for pipe and profile production dropped to 37.6% and 35.13%, respectively—both below 40%. Infrastructure investment edged down by 0.1% year-on-year, making it difficult in the short term to offset the impact of the real estate downturn.

External demand became the only bright spot, with a significant increase in exports: From January to November, China's cumulative PVC powder exports reached 3.5 million tons, a substantial increase of 47% year-on-year, with an estimated annual growth rate of 46.7%. The key driver was India's cancellation of BIS certification and anti-dumping tax policies. India and Vietnam were the main export destinations, accounting for 41.5% and 6.2% of the total, respectively. However, in December, due to rising shipping costs, export orders decreased month-on-month, and profit margins were compressed.

III. 2026 PVC Outlook

As 2026 marks the inaugural year of the 15th Five-Year Plan, the PVC industry will likely see a structural adjustment characterized by capacity elimination, gradually easing the supply-demand contradiction. However, the oversupply situation is unlikely to undergo a fundamental reversal, and prices are expected to rebound in a volatile manner.

Influencing factors:

1. Supply side: Less new capacity added, with some old capacities exiting in China

In 2026, the addition of new production capacity will be limited, with only Zhejiang Jiahua in China planning to mass-produce 300,000 tons of ethylene process capacity. On the contrary, a large amount of capacity will exit the market due to policy promotion. In the first quarter of 2026, there will be a concentrated maintenance wave, with old facilities that have been operating for over 20 years in Xinjiang and Shandong accelerating their exit. Combined with the policy-driven clearance of 3,000,000 tons of high-cost capacity, it is expected that the annual supply growth rate will fall below 1%, and the industry's operating rate is likely to return to a reasonable range of 70%-75%. Overall, the supply situation in 2026 will be favorable for the PVC market.

2. Demand side: Domestic demand in China is slowly increasing, while exports continue to show strength.

In 2026, the real estate sector—PVC’s primary downstream consumer segment—is expected to bottom out and begin to recover as policy effects gradually take hold. By 2026, the decline in newly started housing construction area is forecast to narrow to within 10%, while sales of commercial residential properties are expected to stabilize. Demand for pipes and profiles will rebound to around a 2% growth rate. In addition, support from infrastructure investment will strengthen: major infrastructure projects outlined in the “15th Five-Year Plan” will be launched, driving demand growth in areas such as municipal pipelines and power engineering. As a result, PVC demand in the infrastructure sector is projected to grow at a rate of 5%, making it a key pillar of domestic demand. Furthermore, exports are set for steady growth: with continued strong demand in the Indian market and a stable presence in Southeast Asia, coupled with market gaps created by the closure of 2 million tons of capacity in regions including Europe, Japan, and the United States, China’s PVC, leveraging its price advantage, is expected to see export volumes rise by 15% to 20%. Annual export volumes could exceed 4 million tons, playing a crucial role in digesting existing inventories. Overall, demand growth is significantly outpacing supply growth.

3. Inventory and Costs

The turning point in inventory levels is becoming apparent, with cost support at the bottom and an accelerated pace of PVC inventory depletion expected by 2026. As supply contracts and demand improves, the inventory depletion turning point is forecast to occur in the second quarter of 2026, and by year-end, social inventories are likely to fall below 800,000 tons, significantly easing their downward pressure on prices. Calcium carbide prices may soon stabilize and begin to rebound, while coal prices remain stable. As a result, PVC costs are showing strong resilience at their bottom, and the industry’s loss-making situation will gradually improve. Companies using the calcium carbide method can expect their gross margins to return to the breakeven level.

2026 Price Trend Forecast:

Short-term (1–3 months): Before the Spring Festival, downstream operating rates will further decline to 30%–35%. With demand in the off-season coupled with inventory pressure, prices will remain volatile and continue to bottom out, leaving room for further declines in the spot market.

Mid-term (April–September): As capacity adjustments take hold, infrastructure projects begin construction, and the peak export season kicks in, the improved supply-demand dynamics will drive prices higher. The spot market may usher in a prolonged recovery and upward trend. Spot prices could break through the previous high of 5,000 yuan.

Long-term (10-12 months): Demand growth will slow down, and prices will enter a period of volatile consolidation. The spot price may fluctuate and eventually return to a reasonable range of 4,800–5,000 yuan.