Policy Catalysts + Improved Supply-Demand Dynamics Drive Marginal Improvement in The PVC Industry
In the long run, China's PVC industry is underpinned by solid fundamentals for a positive outlook. First, the continuous implementation of "anti-involution" policies, including differential electricity pricing and the abolition of export tax rebates, will accelerate the clearance of inefficient capacity. Second, global PVC new capacity growth will remain modest in the coming years, leading to a gradual improvement in the supply-demand balance. Third, the global competitiveness of China's PVC industry continues to rise, with vast room for expansion in export markets.
Against the backdrop of further deepening of domestic "anti-involution" policies, from January 24 to 31, 2026, the research team of Guo Tai Futures visited Shaanxi, Ningxia and Inner Mongolia-the three major PVC-producing regions in China. The purpose was to assess the actual impact of core policies such as differential electricity pricing and the abolition of export tax rebates on the PVC industry, and verify the progress of capacity reduction, corporate operational conditions, and on-site supply-demand realities.The surveyed regions account for 7.45 million tonnes of calcium carbide-based PVC capacity, representing 25.55% of China's total PVC capacity and 36% of the national calcium carbide-based PVC capacity. They also host 22.89 million tonnes of calcium carbide capacity, accounting for 60.88% of China's total calcium carbide capacity. Furthermore, these regions are pilot zones for differential electricity pricing, making the research sample highly representative of the industry.
This research focused on two major policies: differential electricity pricing and the abolition of PVC export tax rebates. As key measures under the "anti-involution" policy framework, both have exerted significant impacts on the cost structure, export landscape and capacity mix of the PVC industry.
Regarding differential electricity pricing, the Department of Industry and Information Technology of Shaanxi Province issued a draft consultation document in December 2025, planning to formally implement differential electricity pricing starting July 1, covering seven energy-intensive industries including calcium carbide and PVC. Local PVC and calcium carbide capacity in Shaanxi accounts for 7.18% and 9% of the national total respectively, and the policy will directly push up calcium carbide production costs.According to the survey, the policy is highly likely to be implemented and lays the foundation for nationwide rollout. Upon implementation, PVC production costs in Shaanxi are expected to rise by 70 yuan per tonne, lower than theoretical estimates. Enterprises can hedge the impact through coal-power quota replacement and external procurement of low-cost calcium carbide from Inner Mongolia, resulting in limited actual impact on local PVC producers.Intervieweed enterprises generally agreed that differential electricity pricing is not a regional policy but a national industrial adjustment measure, which is expected to become an important tool for regulating energy-intensive enterprises and upgrading market-oriented constraints on industry costs.
On January 9, the Ministry of Finance and the State Taxation Administration jointly issued the Announcement on Adjusting Export Tax Rebate Policies for Photovoltaic and Other Products, which explicitly includes PVC resin, unplasticized PVC and plasticized PVC in the adjustment scope.This policy triggered a short-term "rush export" phenomenon domestically. Currently, most PVC exporters have pre-sold orders through February, with some enterprises even reducing domestic trade to shift focus to foreign sales, supporting output levels.Affected by shipping schedules, PVC exports are expected to weaken in early March. Coupled with the rainy season in Southeast and South Asia, exports will enter an adaptive adjustment period after April, with a downturn likely to persist until July.From an industry perspective, the abolition of export tax rebates is expected to push up international PVC prices and trigger regional trade restructuring in the short term. However, in the long run, given China's prominent cost and capacity advantages, the policy will promote the expansion of export coverage and product diversification. Meanwhile, the impact on domestic ethylene-based PVC producers is limited, while high-cost enterprises in Henan, Shandong and other regions may face pressure of capacity clearance.
In terms of corporate operations, PVC enterprises in Shaanxi, Ningxia and Inner Mongolia generally maintain healthy cash flows with no losses recorded. Only in mid-to-late December 2025 did some enterprises briefly suffer cash flow losses due to excessive declines in PVC and caustic soda prices. During that period, transactions at low prices-PVC below 4,000 yuan/tonne and liquid caustic soda below 2,000 yuan/tonne-were scarce, and enterprises responded by holding firm on prices and reducing order signings.During the survey period, the price of PVC SG-5 rebounded above 4,500 yuan/tonne, and caustic soda prices remained in the range of 2,100–2,300 yuan/tonne, bringing industry profitability back to a reasonable range.
Regarding capacity clearance, the industry shows obvious regional divergence. Relying on advantages in coal and power resources, the northwest region has become the national cost base for PVC production. All surveyed enterprises believed that this region will not be the first to see capacity reduction.Calcium carbide-based PVC producers in Henan, Shandong and other regions, burdened by relatively high costs, are highly likely to be among the first batch of capacity to be eliminated.By enterprise type, state-owned PVC producers generally face challenges such as insufficient self-owned resources, high depreciation and capital costs, and high inventory pressure on by-products; some also suffer from weak export capabilities. In contrast, private enterprises maintain better operational performance and a more optimistic outlook on the market, supported by full industrial chain integration, cost advantages of self-owned power plants, and flexible pricing and sales strategies.
The eight PVC enterprises covered in this survey include state-owned, private and central state-owned enterprises (CSOEs), with significant operational divergence among them.State-owned enterprises mostly suffer from incomplete industrial chain support and high operational pressure. Private enterprises are generally optimistic about the future market thanks to cost control and flexible operations. Although some product lines of CSOEs are running at a loss, they maintain stable operations with advantages in full-category product layout and cash flow, holding a cautiously optimistic attitude toward the market.
Combining policy impacts, corporate operations and on-site market conditions, the PVC market is expected to exhibit a "high before the Spring Festival, low after the holiday" pattern in the short term. In the long term, it will see marginal improvement supported by dual drivers of policy catalysts and improved supply-demand dynamics.
The PVC market witnessed a "minor spring market" ahead of the Spring Festival, driven by four core factors:First, rising calcium carbide costs provided cost support.Second, overall PVC inventories among domestic producers remained low, with pre-sale cycles of 2–4 weeks. Output ahead of the Spring Festival was nearly fully sold out, putting enterprises in a strong position in price negotiations.Third, "rush exports" ahead of the abolition of export tax rebates continued to underpin prices.Fourth, low caustic soda prices benefited the cost side of PVC production.
After the Spring Festival, however, the market will face multiple pressures. On the one hand, exports will slump following the end of the "rush export" window. On the other hand, expectations of domestic inventory destocking and weakening domestic demand, combined with the abolition of export tax rebates, will weigh on prices.
In the long run, China's PVC industry maintains solid positive fundamentals.First, the continuous implementation of "anti-involution" policies, including differential electricity pricing and the abolition of export tax rebates, will accelerate the elimination of inefficient capacity, optimize the industrial capacity structure, and further increase the market share of high-quality capacity.Second, in 2026, China's PVC capacity withdrawal will reach 895,000 tonnes, while global new capacity will be only 705,000 tonnes, marking the beginning of supply contraction. Modest global PVC capacity expansion and accelerated clearance of inefficient capacity in the coming years will lead to a gradual improvement in supply-demand balance.Third, China's PVC industry boasts clear cost and capacity advantages. Amid constrained overseas capacity, the global competitiveness of China's PVC industry continues to strengthen, offering broad export potential.
Overall, improved supply-demand dynamics and "anti-involution" policy catalysts provide dual support for the PVC industry, confirming its long-term positive trend.