In 2025, China's PVC market faced a "high supply, high inventory, and weak demand" triple characteristic due to capacity expansion and supply-demand imbalance. The price reached a new low for the year and then fluctuated to bottom out. According to the monitoring by Business She Community, the total decline in the SG-5 type of Ethylene-based PVC throughout the year was 11%.

1. Review of the 2025 Market: Overall downward trend with a rebound in mid-year; in the first half of the year, due to the concentrated release of new capacities suppressing supply and demand, the PVC price continued to fluctuate downwards. According to the monitoring by Business She Community, the price of the SG-5 type of Ethylene-based PVC in June and July was from nearly 5000 yuan to about 4500 yuan. In the period from June to late July, this was the only wave of price increase in the entire year, mainly due to short-term supply-demand mismatch caused by supply contraction and inventory reduction, coupled with factors such as policy expectations and futures speculation. It was part of the overall "low volatility" pattern in the year. By late July, PVC reached its annual peak, breaking through the 5000 yuan mark. After July, as maintenance work gradually resumed on refining units, weak exports continued, and end-user demand returned to rationality, PVC prices returned to a downward channel, with a slight rebound at the end of the year mainly supported by policy measures and a recovery in futures sentiment.

2. Supply and Demand Pattern: Capacity Expansion Ends & Weak Demand Leading to Increased Tensions
   a) Supply Side: Concentrated Expansion & High Inventory
   Firstly, in 2025, China's new PVC capacity increased by 2.2 million tons (net increase of 2.05 million tons), with the total capacity exceeding 29.93 million tons at the end of the year, a year-on-year increase of 7.35%, and the proportion of ethylene-based methods rose to 28%, marking the official end of the rapid capacity expansion cycle. Table: 2025 Domestic PVC New Capacity Statistics
   Secondly, operating rates were high in the middle and high levels: the average operating rate maintained between 77%-78% during the year, according to monitoring, the operating rate was about 77% at the end of the year, although it fell back from previous highs, limited by safety operations and annual production tasks. Only some small and high-cost enterprises reduced losses passively, and old units in Xinjiang and Shandong began to exit sporadically. Finally, production steadily grew: from January to November, the total output was 22.32 million tons, an increase of 4.35% year-on-year, and the expected total output was 24.5 million tons, an increase of 4.52% year-on-year, with the output growth rate of the ethylene method reaching 13%, becoming the core of the additional supply. Figure: 2025 Domestic PVC Production Statistics
   b) Demand Side: Weakness in Demand & Some Improvements in Exports
   In 2025, domestic demand for PVC remained weak: 60% of downstream industries in PVC relied on real estate, with residential new construction area in January and November being 392 million square meters, a year-on-year decrease of 19.9%, real estate investment decreased by 15.9% year-on-year, dragging down the operation rates of pipelines and profiles to below 40%. Investment in infrastructure saw a slight decline of 0.1% year-on-year, which is difficult to offset the impact of real estate declines in the short term. Foreign demand became the only bright spot, with export volumes increasing significantly: from January to November, the total exported powder PVC amounted to 3.5 million tons, a year-on-year increase of 47%, with an estimated annual increase of 46.7%. India's cancellation of BIS certification and anti-dumping tax policies played a key role, with India and Vietnam being major export destinations (accounting for 41.5% and 6.2% respectively). However, in December, due to rising shipping costs, export orders declined month-on-month, reducing profit margins.

3. Outlook for 2026: A structural adjustment towards capacity reduction is likely in 2026, with supply tensions expected to gradually ease. However, the overcapacity situation will not fundamentally reverse, and prices are expected to achieve a fluctuation rebound. Factors affecting the outlook include:
   a) Supply Side: Few New Capacity Additions & Old Capacity Withdrawals
   In 2026, there will be few new capacities added, with only Zhejiang Jiafuo's planned 300,000 tons of ethylene-based capacity coming online. On the contrary, policy efforts will lead to the withdrawal of many capacities that were previously operating in excess of 20 years, with a total supply increase expected to fall within 1%. The operational rate of the industry is expected to drop to around 70%-75%. In 2026, supply side dynamics are generally favorable for the PVC market.
   b) Demand Side: Slow Recovery in Domestic Needs & Continued Growth in Exports
   In 2026, as the main consumer area for PVC in China's downstream industries may bottom out and rebound, effects from policy will gradually be transmitted. It is expected that the new construction area for housing will see a decline of within 10%, and housing sales area is expected to stabilize. The demand growth for pipes and profiles is expected to rebound to about 2%. Additionally, infrastructure support will increase: major infrastructure projects in the "Fifteen Fifty" plan, such as municipal pipework and power engineering sectors, will see increased demand, with the demand growth rate for infrastructure expected to reach 5%. This will become an important support for domestic needs. Furthermore, export growth is expected to continue: India's market demand continues to release, and markets in Southeast Asia remain stable. Coupled with the closure of 2 million tons of capacities in Europe, Japan, and the United States, China's PVC will leverage its price advantage, with export volumes expected to grow by 15%-20%, helping to digest inventory. Overall, demand growth is expected to significantly outpace supply growth.
   c) Inventory and Cost Decline Point Showing Up - Rallying Support for Cost Base
   In 2026, inventory destocking is expected to accelerate: with supply contraction and demand improvement, it is anticipated that the inventory destocking point will emerge in the second quarter of 2026, and by the end of the year, social inventory is expected to drop below 800,000 tons, significantly weakening its pressure on prices. The price of electric chloride may experience a rebound to the bottoming out stage, coal prices remain stable, and the cost base bottoming out of PVC is very resilient. The industry's loss situation is expected to gradually improve, and the gross profit of electric chloride companies is expected to return to breakeven line.
   Price Forecast for 2026: Short-term (January-March): Before the Spring Festival, the operating rate of downstream industries may further decline to between 30%-35%, and with the off-season demand downturn and inventory pressure, prices are expected to maintain fluctuations, with the spot market still facing downward space. Mid-term (April-September): With capacity reduction landing, infrastructure project starts, and the peak season of export surge, supply and demand conditions are expected to improve, driving prices to rebound, with the spot market potentially experiencing a long-period correction and uplift in prices. Prices are expected to break through the previous high of 5000 yuan. Long-term (October-December): With demand growth slowing down, prices will enter a fluctuation adjustment phase, with the spot price likely returning to a reasonable range of 4800-5000 yuan.