Global operating rates at PVC plants have remained high despite annual capacity additions, due to strong demand growth in most regions over 2005-06. Global PVC demand is expected to show moderate growth until 2010. A slowdown in capacity additions will sustain high operating rates over the next three years, stabilizing the supply/demand balance over 2007-2008. After this period, operating rates are estimated to decline towards a trough in 2011. PVC consumption continued its recent strong growth in all major sectors in major consuming regions except the United States, where a decline in construction and housing contrasted the buoyant construction market in other regions. Demand growth is forecast to peak in 2007, before a decline in growth rates over 2008-2010.  

Annual capacity addition in 2005-06 has been over 2 mln tpa in China alone. Over the past two years, more than 90% of capacity additions have been made in China alone. Since the bulk of capacity growth in China has been coal/acetylene-based, it has been unaffected by high crude oil prices, thus changing the price setting mechanism in the region. Reduced imports to China have caused difficulties for the neighbouring exporting countries of Japan, South Korea and Taiwan . The result has been a steep decline in margins for East Asian producers, while their counterparts in Western Europe and the United States enjoyed a cyclical increase in margins. Following the massive capacity development in China over 2000-06 (a period during which PVC capacity increased threefold), the focus of capacity development is moving to North America and the Middle East over 2007-2008. EDC capacity in the Middle East is developing rapidly both for export and as part of integrated vinyls complexes. The Middle East is currently a significant net importer of PVC, but this position will reverse as the major new complexes develop. In addition to integrated vinyls development, the Middle East will also develop excess EDC capacity for export, mainly to Asia. Vinyls capacity in China includes few VCM/PVC production based on imported EDC, and few fully integrated EDC/VCM/PVC production, but remains largely focused on coal/acetylene based VCM, which enables the exploitation of inland coal resources, as well as reducing China 's requirement for imported petrochemical feedstock. Legislation announced to limit the development of uneconomical or environmentally damaging projects has not impeded the pursuit of large-scale coalfield based VCM/PVC plants based on acetylene. This industry in China has achieved such scale and momentum that the proportion of VCM produced from acetylene globally will increase from 6% in the year 2000 to 19% by 2008.
In 2006, massive capacity increase in China amplified capacity in Asia Pacific region to 50% of global total capacities. Capacity will continue to develop to serve the booming construction markets in Asia, increasing the region's proportion of global capacity. Capacity in developed regions will remain comparatively stable, whilst developing regions such as Africa and South America will see higher growth. The most significant developments outside Asia will be in the Middle East, where major capacity developments will occur to serve the local supply deficit and develop an export position.
The difficult market conditions in the vinyls industry during much of the previous decade have already led to widespread consolidation among producers, and the closure of uncompetitive capacity in most regions. The high demand growth in China has however permitted many small producers to keep operating, although some consolidation is also expected there during the next downturn.