Ethylene PVC production companies usher in a turning point

This year, the overall operating performance of the entire plant has seen a significant improvement compared to the same period last year, mainly driven by the profitability of the PVC plant, according to Liu Aidong, director of the publicity department at Qilu Petrochemical Plastic Factory. He shared this insight with reporters recently. Similarly, the head of Shanghai Chlor-Alkali Chemical Co., Ltd. expressed satisfaction with the company's performance in the first half of the year. The company reported a net profit of 20.258 million yuan, a remarkable increase of 176.23% year-on-year. Among its products, PVC contributed significantly, generating sales revenue of 960,587,500 yuan and a profit of 11,142,600 yuan, accounting for 55.49% of the company’s total net profit. Just a year ago, the PVC plant was still a major loss-making segment. These two companies are among the leading players in China's ethylene-based PVC industry. Other notable companies, such as Tianjin Union Chemicals, Tianjin Daxie Chemical Co., Ltd., and Formosa Plastics (Ningbo) Co., Ltd., have also seen improved operational performance from January to August this year. Many of them achieved their first profit since the third quarter of 2005, marking a turning point for the industry. Last year, ethylene-based PVC faced widespread losses due to the low prices of calcium carbide-based PVC. However, this year’s profitability is largely attributed to the country’s macro-control policies, which have led to rising costs for calcium carbide technology, according to Liu Aidong. Since 2005, the Chinese government has implemented a series of environmental protection measures aimed at regulating high-energy consumption and high-pollution industries. Calcium carbide and chlor-alkali enterprises have been targeted. Policies such as raising entry barriers, eliminating outdated production capacities, implementing differentiated electricity pricing, restricting bank loans, and requiring pollution control facilities have significantly increased the production costs of calcium carbide companies. In August, the ex-factory price of calcium carbide across regions rose by over 700 yuan per ton compared to the previous year, reaching more than 2,700 yuan per ton. Given that it takes about 1.4 to 1.5 tons of calcium carbide to produce one ton of PVC, the cost for calcium carbide-based PVC producers increased by approximately 1,000 yuan per ton. Combined with rising electricity and freight costs, the overall production costs for these companies have surged, leading to higher product prices. The rise in calcium carbide-based PVC prices has narrowed the price gap between ethylene-based and calcium carbide-based PVC, allowing ethylene-based PVC companies to remain profitable. Despite the small price difference, the strong price competitiveness of calcium carbide-based PVC persists due to the low profits of downstream companies. Some large firms continue to maintain profitability after passing environmental tests. Experts believe that the future of calcium carbide-based PVC remains promising, but success depends on how companies manage their operations. Xinjiang Tianye News, a major calcium carbide PVC manufacturer in China, has an annual production capacity of 300,000 tons. This year, the company faced rising raw material costs but managed to maintain a competitive edge by operating its own power plant, reducing electricity costs by nearly half. Additionally, through technological innovation, the company developed calcium carbide slag cement production technology and waste gas and wastewater recycling systems, achieving resource recovery and saving millions annually. As environmental regulations tighten and sewage charges rise, these eco-friendly initiatives will bring additional revenue. With national macro-control policies intensifying and stricter environmental requirements, the cost advantage of calcium carbide-based PVC is diminishing. Experts suggest that ethylene-based PVC companies should take this opportunity to focus on high-end and specialized products, avoiding direct competition with calcium carbide-based PVC in the low-end market.

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