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The proportion of ethylene based PVC process is expected to further increase in the future
2023/8/23
PVC is mainly divided into two processes: calcium carbide process and ethylene process. In recent years, ethylene process has obvious competitive advantages in policy, cost, export, and quality, and the proportion of ethylene process has been increasing year by year. In the future, ethylene based PVC will still have a certain advantage in value chain competition, and the proportion of ethylene based processes is expected to continue to increase.
Polyvinyl chloride powder resin (PVC powder) is a thermoplastic synthetic resin polymer formed by polymerization of vinyl chloride monomer (VCM), which is a white powdery solid. From the perspective of production process, based on the method of obtaining vinyl chloride monomer, it can be divided into two processes: calcium carbide method and ethylene method (commonly referred to as ethylene method for self-produced ethylene, imported ethylene, imported VCM, and purchased VCM). Due to the current energy situation in China, which is rich in coal and poor in oil, calcium carbide method is the main method in China, supplemented by ethylene method. However, in recent years, the proportion has gradually changed.
In recent years, as the industry matures, the ethylene process has shown certain advantages in policy, cost, export, and quality in horizontal value chain competition, and the proportion of ethylene process has been increasing year by year.
From statistical data, it can be seen that the proportion of ethylene based PVC processes has been increasing year by year since 2015. In 2015, the proportion of ethylene based PVC processes was only 15.78%, and in 2023, the proportion of ethylene based PVC processes is expected to increase to 25.75%, an increase of 9.97 percentage points compared to 2015.
The ethylene process is relatively clean and environmentally friendly, and there is no resistance to expanding production
On August 16, 2017, the Minamata Convention on Mercury officially entered into force for China, and China, as a contracting party, promised to minimize the use of mercury domestically. The largest amount of mercury used in China is the mercury catalyst used in the production process of PVC using calcium carbide method. Therefore, after the implementation of the Minamata Convention, the difficulty of passing the environmental impact assessment of PVC projects using calcium carbide method has increased.
In the updated industrial structure adjustment guidance catalog in 2019, it was stipulated that high mercury catalysts (with a mercury chloride content of over 6.5%) and acetylene based PVC production plants using high mercury catalysts were included in the eliminated industry. Since 2020, China's carbide based PVC has achieved low mercury content. In addition, the 2019 version of the industrial structure adjustment catalog also stipulates that acetylene based PVC and ethylene oxychloride based PVC with an initial scale of less than 300000 tons/year are restricted categories, greatly limiting the environmental impact assessment approval of calcium carbide based PVC projects.
In the context of low-carbon policies, Inner Mongolia, as one of the largest PVC production areas in China, stipulated in the 2021 "Several Guarantee Measures for Ensuring the Completion of the Energy Consumption Dual Control Target Tasks of the 14th Five Year Plan" that starting from 2021, coke (2263, 63.00, 2.86%) (blue coke), calcium carbide, polyvinyl chloride (PVC), etc. will no longer be approved.
Among the numerous relevant policies mentioned above, the expansion of the calcium carbide PVC process is greatly restricted, while the ethylene PVC process is cleaner and more environmentally friendly, and is basically not restricted by policies.
There are certain advantages in the cost of ethylene process
From the comparison of calcium carbide and ethylene, the advantages of ethylene are beginning to be reflected. Starting from 2018, domestic large ethylene projects were launched, and 2019 to 2025 will be a few years when China's large ethylene projects will be concentrated. According to statistics, the compound growth rate of China's ethylene production capacity from 2019 to 2022 was 17.89%. As a high energy consuming industry, the raw material of PVC produced by calcium carbide method has been restricted by policies in recent years, resulting in a significant slowdown in production capacity growth. From 2019 to 2022, the compound growth rate of calcium carbide production capacity was only 1.54%. So in recent years, the supply of calcium carbide has been relatively tight, with sufficient ethylene supply and low ethylene prices. The cost advantage of ethylene based PVC is gradually reflected, indicating that the cost of ethylene based PVC from 2020 to 2023 is lower than that of calcium carbide based PVC, especially the cost advantage of ethylene based process in 2021.
Increasing export dependence gives ethylene method more advantages
In recent years, as the domestic supply and demand relationship has shifted from tight balance to oversupply, export dependence has gradually increased. For the international market, except for the carbide process in China, all foreign countries use the ethylene process. From the comparison of the quality between the carbide process and the ethylene process, the ethylene process has more advantages in the water content and molecular weight of vinyl chloride, improving the thermal stability, whiteness, aging resistance, mechanical strength and other indicators of the ethylene process. In addition, the ethylene process is more environmentally friendly compared to the carbide process, eliminating the problem of mercury pollution. So foreign customers prefer ethylene method sources, while domestic PVC is mainly sold to developing countries. The export price of calcium carbide method is generally $20-40 lower than that of ethylene method, and there are fewer regions willing to purchase calcium carbide method compared to ethylene method.
In the next five years, the growth in PVC demand is expected to be mainly in China, India, Southeast Asia, the Middle East, and Africa, which are mostly the main export destinations for Chinese PVC. Therefore, there is still a significant opportunity for Chinese PVC exports in the future, and this opportunity is more advantageous for the ethylene process than the calcium carbide process.
There is still an expectation of increasing the proportion of ethylene method's competitive advantage in the future
Looking ahead, the advantages of the ethylene based PVC process will continue. On the one hand, there will still be a period of concentrated production capacity for the raw material ethylene in the future, and the cost advantage of the ethylene based process will continue. On the other hand, policies continue to favor the ethylene process, and the calcium carbide process still faces significant challenges in mercury pollution. The final date for the complete ban on mining of primary mercury mines in the Minamata Convention on Mercury is August 16, 2032. Prior to this, the calcium carbide process will face technological breakthroughs in mercury free catalysts, and the upgrading and transformation of the process will inevitably further increase the cost of the calcium carbide process. The third aspect is that future export opportunities are more conducive to the development of ethylene process.
In addition, future changes in the domestic demand structure may be beneficial for the ethylene process. The application and development prospects of ethylene based PVC in the medical industry are relatively good, while the future prospects of calcium carbide based PVC in real estate related demand applications are relatively general.
On the one hand, PVC downstream products are in the real estate related industry mainly composed of pipes, profiles, and flooring, on the other hand, in the daily necessities industry mainly composed of films, and on the third hand, in the medical industry mainly composed of medical packaging.
From the perspective of the development prospects of the above three industries, the real estate industry represented by pipes and profiles has experienced 20 years of rapid development, and there is an expectation of a weakening development prospect in the next 5-10 years. On the one hand, due to the decline in China's fertility rate, the demographic dividend is disappearing, and the potential growth rate of future demand will weaken. On the other hand, the leverage ratio of residents has reached a high level, and the willingness of residents to continue to increase leverage has decreased. The third aspect is that the domestic urbanization rate has exceeded 65%, although it has not yet reached the level of developed countries, there is not much room for improvement. The demand for real estate is mainly based on the calcium carbide method, so the future demand for the calcium carbide method is expected to have poor prospects for real estate.
PVC film is widely used in industries such as construction, electricity, agriculture, automobiles, clothing, daily chemicals, and food. Among them, the building materials field is currently the largest application scale of PVC film. The demand for furniture and building materials applications accounts for 58%, and the demand for packaging industry accounts for 35%. The development of the real estate market has entered a downward phase, so it is expected that the application of PVC film in furniture and building materials will be affected in the future. However, with the expansion of PVC film application fields, it is expected that the application of PVC film in agriculture, safety and other fields may increase. This part of the demand is mainly for the corresponding calcium carbide method products, and the demand prospects are relatively average.
Sheet material is a relatively high-end market in downstream PVC products, mainly used in medical and medical packaging. Due to strict requirements for impurities, fish eyes, and other indicators, ethylene based PVC is mainly used. With the acceleration of China's aging process and the improvement of China's quality of life, the demand for medical care is also gradually increasing. The future demand prospects for medical packaging are relatively good, but sheet materials face the problem of PET substitution. In addition, the demand for toys is relatively stable, which is mainly beneficial for vinyl PVC.
Polyvinyl chloride powder resin (PVC powder) is a thermoplastic synthetic resin polymer formed by polymerization of vinyl chloride monomer (VCM), which is a white powdery solid. From the perspective of production process, based on the method of obtaining vinyl chloride monomer, it can be divided into two processes: calcium carbide method and ethylene method (commonly referred to as ethylene method for self-produced ethylene, imported ethylene, imported VCM, and purchased VCM). Due to the current energy situation in China, which is rich in coal and poor in oil, calcium carbide method is the main method in China, supplemented by ethylene method. However, in recent years, the proportion has gradually changed.
In recent years, as the industry matures, the ethylene process has shown certain advantages in policy, cost, export, and quality in horizontal value chain competition, and the proportion of ethylene process has been increasing year by year.
From statistical data, it can be seen that the proportion of ethylene based PVC processes has been increasing year by year since 2015. In 2015, the proportion of ethylene based PVC processes was only 15.78%, and in 2023, the proportion of ethylene based PVC processes is expected to increase to 25.75%, an increase of 9.97 percentage points compared to 2015.
The ethylene process is relatively clean and environmentally friendly, and there is no resistance to expanding production
On August 16, 2017, the Minamata Convention on Mercury officially entered into force for China, and China, as a contracting party, promised to minimize the use of mercury domestically. The largest amount of mercury used in China is the mercury catalyst used in the production process of PVC using calcium carbide method. Therefore, after the implementation of the Minamata Convention, the difficulty of passing the environmental impact assessment of PVC projects using calcium carbide method has increased.
In the updated industrial structure adjustment guidance catalog in 2019, it was stipulated that high mercury catalysts (with a mercury chloride content of over 6.5%) and acetylene based PVC production plants using high mercury catalysts were included in the eliminated industry. Since 2020, China's carbide based PVC has achieved low mercury content. In addition, the 2019 version of the industrial structure adjustment catalog also stipulates that acetylene based PVC and ethylene oxychloride based PVC with an initial scale of less than 300000 tons/year are restricted categories, greatly limiting the environmental impact assessment approval of calcium carbide based PVC projects.
In the context of low-carbon policies, Inner Mongolia, as one of the largest PVC production areas in China, stipulated in the 2021 "Several Guarantee Measures for Ensuring the Completion of the Energy Consumption Dual Control Target Tasks of the 14th Five Year Plan" that starting from 2021, coke (2263, 63.00, 2.86%) (blue coke), calcium carbide, polyvinyl chloride (PVC), etc. will no longer be approved.
Among the numerous relevant policies mentioned above, the expansion of the calcium carbide PVC process is greatly restricted, while the ethylene PVC process is cleaner and more environmentally friendly, and is basically not restricted by policies.
There are certain advantages in the cost of ethylene process
From the comparison of calcium carbide and ethylene, the advantages of ethylene are beginning to be reflected. Starting from 2018, domestic large ethylene projects were launched, and 2019 to 2025 will be a few years when China's large ethylene projects will be concentrated. According to statistics, the compound growth rate of China's ethylene production capacity from 2019 to 2022 was 17.89%. As a high energy consuming industry, the raw material of PVC produced by calcium carbide method has been restricted by policies in recent years, resulting in a significant slowdown in production capacity growth. From 2019 to 2022, the compound growth rate of calcium carbide production capacity was only 1.54%. So in recent years, the supply of calcium carbide has been relatively tight, with sufficient ethylene supply and low ethylene prices. The cost advantage of ethylene based PVC is gradually reflected, indicating that the cost of ethylene based PVC from 2020 to 2023 is lower than that of calcium carbide based PVC, especially the cost advantage of ethylene based process in 2021.
Increasing export dependence gives ethylene method more advantages
In recent years, as the domestic supply and demand relationship has shifted from tight balance to oversupply, export dependence has gradually increased. For the international market, except for the carbide process in China, all foreign countries use the ethylene process. From the comparison of the quality between the carbide process and the ethylene process, the ethylene process has more advantages in the water content and molecular weight of vinyl chloride, improving the thermal stability, whiteness, aging resistance, mechanical strength and other indicators of the ethylene process. In addition, the ethylene process is more environmentally friendly compared to the carbide process, eliminating the problem of mercury pollution. So foreign customers prefer ethylene method sources, while domestic PVC is mainly sold to developing countries. The export price of calcium carbide method is generally $20-40 lower than that of ethylene method, and there are fewer regions willing to purchase calcium carbide method compared to ethylene method.
In the next five years, the growth in PVC demand is expected to be mainly in China, India, Southeast Asia, the Middle East, and Africa, which are mostly the main export destinations for Chinese PVC. Therefore, there is still a significant opportunity for Chinese PVC exports in the future, and this opportunity is more advantageous for the ethylene process than the calcium carbide process.
There is still an expectation of increasing the proportion of ethylene method's competitive advantage in the future
Looking ahead, the advantages of the ethylene based PVC process will continue. On the one hand, there will still be a period of concentrated production capacity for the raw material ethylene in the future, and the cost advantage of the ethylene based process will continue. On the other hand, policies continue to favor the ethylene process, and the calcium carbide process still faces significant challenges in mercury pollution. The final date for the complete ban on mining of primary mercury mines in the Minamata Convention on Mercury is August 16, 2032. Prior to this, the calcium carbide process will face technological breakthroughs in mercury free catalysts, and the upgrading and transformation of the process will inevitably further increase the cost of the calcium carbide process. The third aspect is that future export opportunities are more conducive to the development of ethylene process.
In addition, future changes in the domestic demand structure may be beneficial for the ethylene process. The application and development prospects of ethylene based PVC in the medical industry are relatively good, while the future prospects of calcium carbide based PVC in real estate related demand applications are relatively general.
On the one hand, PVC downstream products are in the real estate related industry mainly composed of pipes, profiles, and flooring, on the other hand, in the daily necessities industry mainly composed of films, and on the third hand, in the medical industry mainly composed of medical packaging.
From the perspective of the development prospects of the above three industries, the real estate industry represented by pipes and profiles has experienced 20 years of rapid development, and there is an expectation of a weakening development prospect in the next 5-10 years. On the one hand, due to the decline in China's fertility rate, the demographic dividend is disappearing, and the potential growth rate of future demand will weaken. On the other hand, the leverage ratio of residents has reached a high level, and the willingness of residents to continue to increase leverage has decreased. The third aspect is that the domestic urbanization rate has exceeded 65%, although it has not yet reached the level of developed countries, there is not much room for improvement. The demand for real estate is mainly based on the calcium carbide method, so the future demand for the calcium carbide method is expected to have poor prospects for real estate.
PVC film is widely used in industries such as construction, electricity, agriculture, automobiles, clothing, daily chemicals, and food. Among them, the building materials field is currently the largest application scale of PVC film. The demand for furniture and building materials applications accounts for 58%, and the demand for packaging industry accounts for 35%. The development of the real estate market has entered a downward phase, so it is expected that the application of PVC film in furniture and building materials will be affected in the future. However, with the expansion of PVC film application fields, it is expected that the application of PVC film in agriculture, safety and other fields may increase. This part of the demand is mainly for the corresponding calcium carbide method products, and the demand prospects are relatively average.
Sheet material is a relatively high-end market in downstream PVC products, mainly used in medical and medical packaging. Due to strict requirements for impurities, fish eyes, and other indicators, ethylene based PVC is mainly used. With the acceleration of China's aging process and the improvement of China's quality of life, the demand for medical care is also gradually increasing. The future demand prospects for medical packaging are relatively good, but sheet materials face the problem of PET substitution. In addition, the demand for toys is relatively stable, which is mainly beneficial for vinyl PVC.
Overall, ethylene based PVC still has certain advantages in terms of policies, costs, exports, and demand applications in the future, and the proportion of ethylene based PVC processes is expected to further increase.
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