China becomes major PVC, PTA exporter for first time in history

Economic growth

SHARE THIS STORY

China PVC Oct14Be very careful what you wish for.  That is the key message coming out of close analysis of China’s latest trade data.

Recent media reports were upbeat at news that China’s exports had increased, as it appeared to suggest Western demand was returning.  But it seems nothing could be further from the truth.

One major concern is that part of the increase was due to the final convulsions of the collateral trade, as I will discuss tomorrow.  Property developers are clearly making last desperate efforts to raise cash by any possible means

A second critical issue is that the data confirms that China is now becoming a major exporter of high value products, such as PVC and PTA, for the first time in history.

CHINA IS BECOMING A MAJOR EXPORTER OF PVC
PVC highlights the change underway, as data from Global Trade Information Services shows.  PVC is one of the world’s major plastics, used in drainage pipes and windows by the construction industry.  As recently as 2009, when its stimulus programme began, China was the world’s largest importer.

Its net imports in 2009 totalled nearly 1.5 million tonnes, coming mainly from Asia and the US.  But since then it has been busy expanding its own production.  By 2012, its domestic output had jumped 70% from 9MT to 15.25MT.  As a result of this, and the start of the housing market slowdown, its 2012 net imports halved to 665kt.

Since then, further major change has taken place as the chart shows, based on January – September data:

  • Critically, China is no longer a net importer of PVC
  • Its total imports have fallen to just 608KT in 2014 (red column) versus 816kt in 2012 (blue column)
  • Its total exports have risen from 285KT to 949kt over the same period
  • As a result, it has become a net exporter of 341kt

This change in policy by China was confirmed a year ago at the 3rd Plenum.  And its impact has been building since May.

  • The big loser so far has been the USA, despite its cost advantage due to shale gas developments
  • China’s imports from the US are already down 34% versus 2012 levels
  • And at the same time, China has been gaining export market share, partly at US expense
  • It has sold 364kt into India so far this year and 175kt into SE Asia
  • Exports to the Former Soviet Union have doubled from 124kt in 2012 to 277kt this year.

It also seems highly unlikely that China will change course.  Most of its PVC production is coal-based, and it is strategically important for the country to maximise use of this resource, given its wider energy deficit.  PVC production also maintains employment in the coal regions – which is critical for social stability.

PTA DEVELOPMENTS CONFIRM THE TREND TO EXPORTS
Developments in PTA, the raw material for polyester, confirm the major change now underway:

  • China was importing 6.5MT of PTA as recently as 2011, but volumes more than halved to just 2.76MT in 2013
  • In January – September  2014, import volumes have more than halved versus 2013 to under 1MT
  • China has also begun exporting PTA for the first time in history, with volume of 340kt by September
  • On current trends, China could also be a net exporter of PTA by this time next year

Companies and investors seem so far to have preferred to ignore these developments.  But China’s drive towards self-sufficiency is unlikely to reverse.  And social stability means it has to replace its lost export-oriented jobs in low-margin textile and other industries via a move up the value chain.

Thus very soon, one suspects, the Western media will be reporting howls of pain instead of cheers as China’s export surge continues.

 

PREVIOUS POST

"BASF slashes 2015 targets on slowing global growth"

27/10/2014

“BASF, the world’s biggest chemical maker by sales, has slashed its reve...

Learn more
NEXT POST

China sees $13.5bn of fake September 'collateral trade' invoices

29/10/2014

China’s ‘collateral trade’ is still a major force in world mar...

Learn more
More posts
Debt, deflation, demographics and Brexit set to challenge London house prices
17/05/2020

London property websites haven’t used the word “reduced” for many years. But it...

Read
The bill for two decades of doomed stimulus measures is due
03/05/2020

The Financial Times kindly made my letter on the risks now associated with central bank stimulus the...

Read
Local supply chains replace global trade as world starts to “do more with less”
26/04/2020

Something quite dramatic is happening in the global economy.  Of course, Wall Street analysts still...

Read
Financial markets enter their Convulsion phase
19/04/2020

Many companies and investors are still comparing today’s downturn to the 9-month hiccups seen afte...

Read
World risks moving from Denial into Anger as the Paradigm of Loss moves forward
12/04/2020

The head of the IMF has warned again on the likely scale of the economic depression ahead: “Gl...

Read
The world has wasted 3 months – there is little time now left to avoid a Covid-19 catastrophe
05/04/2020

It is now 3 months since China’s state television broadcast the first news of the Wuhan virus,...

Read
A new recession era to emerge
22/03/2020

Contingency planning has become mission-critical. The longer the coronavirus pandemic continues, the...

Read
Chain’s smartphone and auto sales tumble as coronavirus hits demand
08/03/2020

China is the world’s largest market for smartphones and autos – responsible for c30% of ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more