BLOG: Global PVC markets tell a familiar of story of supply overhang, greater geopolitical risks

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

No matter which petrochemical or polymer you examine, the story is similar. To illustrate this point, let’s today look at polyvinyl chloride (PVC).

As China’s economy boomed, largely thanks to the growth in its exports, so did its petrochemicals demand, increasing the gap between China’s consumption and that of the much more populous Developing World ex-China region.

China’s 2008-2009 US$586bn economic stimulus package – which largely went into housing and infrastructure – seems to have had a much bigger effect on the country’s PVC demand than in some other products.

Up until the Evergrande turning point in September 2021, China’s investment in housing and infrastructure continued at apace.

It appears as if stimulus greatly increased the importance of Chinese PVC demand as a driver of global PVC demand: Between 1992 and 2008, China’s share of global demand averaged 17% per year; in 2009-2024, the ICIS Supply & Demand Database expects China’s share to reach 40%.

China’s demand growth averaged 10% per annum between 1992 and 2023. But growth is forecast to decline to 3% per year in 2024-2030. This decline is in line with what ICIS expects in other products.

Between 1992 (the start of what I see as the Petrochemicals Supercycle) and 2023, global PVC capacity exceeding demand was estimated by ICIS as averaging 8m tonnes a year.

As with many other products, ICIS forecasts a big increase in global PVC capacity exceeding demand in 2024 -2030. During this period, capacity exceeding demand is expected to average 15m tonnes a year.

In another parallel with other products, China’s self-sufficiency in PVC has reached the point where it has swung from being a major net importer to being a net exporter.

Trade tensions between China and the West have been building since Mike Pence, the then US Vice President, made a landmark speech in October 2018.

Could this translate to more protectionism in global PVC markets? It is a scenario worth considering as China seeks to increase its exports, challenging the US which accounts for the lion’s share of export trade.

During the Petrochemicals Supercycle, the world was becoming ever-more globalised rather than what we are seeing today – the reverse.

China was the tide that lifted all ships. Almost every year, its growth surprised on the upside, guaranteeing success for even the least-competitive plants.

We didn’t we have to worry about big increases in China’s self-sufficiency in PVC, polyethylene (PE) and polypropylene (PP).

Now everything has changed, making big picture analysis of China’s economic problems and the global geopolitical landscape crucial.

This kind of analysis has become as important if not more important than studying cost-per-tonne economics.

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.