PVC (polyvinyl chloride) is a commodity polymer which requires lower oil feedstocks compared to polyolefins. Market for PVC has matured in large economies of North America, Europe and Japan, but is driven by a stupendous growth in Asia particularly in China, East Asian region & India.
Global installed capacity of PVC in 2006 was about 40 mln tons, while the global consumption in 2006 was just about 33 mln tons. The regional distribution of consumption of PVC shows Asia to be the largest region accounting for 45% at about 15 mln tons. China alone accounted for 9 mln tons- 27% of the global consumption. Both North America and Europe consume almost equally at 21-22% (7 mln tons).

Asia had capacity of about 20 mln tons (50% of the global capacity) and therefore appears to be in balance. However, although dependence on imports in China has reduced dramatically over the last few years, the country still requires to import 2 mln tons. By 2006, China developed capacity of 11 mln tons and is poised to expand capacity tremendously in the next few years - making China an exporting hub instead of a significant importer. By 2010, capacity in China will be pegged at 18 mln tons - increasing by 7 mln tons (about 65% increase).
About 70% of PVC production in China is based on carbide feedstock (the largest in the World due to its large capacity of coal). It plans to increase its share to almost 80% by 2010. This process makes Chinese producers to be cost competitive on account of low cost feedstock of carbide. China will influence the price of PVC as a major exporter instead of a major importer.
The revival of the acetylene process to make VCM in China is due to the low cost of calcium carbide, despite its high energy content, because of the cheapness of coal and electricity in the north-west provinces. Most of the VCM and PVC in China is produced from acetylene derived from calcium carbide, a route that was superseded by the ethylene route in the rest of the world during the 1970s and 1980s due to its superior economics.
VCM consumption in China more than doubled from about 3.5 million tons in 2002 to over 8 million tons in 2006. The proportion of acetylene-derived VCM increased from 55% in 2002 to almost 70% in 2006. The reasons for this include low feedstock costs, low investment cost of the calcium carbide/acetylene route compared to the ethylene route, ethylene shortage in China, the escalation in international VCM and PVC prices and the imposition of anti-dumping duties on PVC imports into China from certain countries.
Of the 8 million tons of PVC produced in China in 2006, nearly 90% was made from domestically produced VCM. The proportion of PVC produced from imported VCM has declined from 20% in 2003 to 11% in 2006 and will continue to decline, due to the still rising domestic production of VCM from acetylene-based plants. Crude oil prices are likely to be around US$75 per barrel or even higher, it seems probable that the acetylene-derived PVC will have a cost advantage for some considerable time due to the relative price of coal in China and crude oil price, the cost of production of electricity and the ECU, and the dynamics of chlorine versus caustic soda markets.

Demand for polyvinyl chloride (PVC) in China will rise 8% pa to 12 mln tons in 2010, primarily driven by healthy (although moderating) growth in construction expenditures, as well as by advances in consumer spending and the growing share of plastics in packaging applications. In 2005, China consumed 8.2 million metric tons of PVC, surpassing the US to become the largest consumer of PVC in the world. Extrusion is the most important process used to manufacture PVC products in China, with extruded products projected to make up more than half of the market in 2010. This growth reflects good opportunities for PVC in the construction market, which accounted for more than 70% of extruded products demand in 2005. The second largest use, molded products, will grow more than 6% pa through 2010, based on strong demand in packaging applications. Increasing growth in synthetic leather production will drive demand for dispersion coated PVC, which will be the fastest growing use through 2010.
In 2006, the proportion of rigid was 53% and this is gradually increasing towards the typical 60% level found in developed countries. Pipe and pipe fittings account for 46% of the consumption of rigid PVC. Film accounts for 30% of flexible PVC consumption, other major applications being wire and cable and PVC leathercloth. Only about 60% of PVC film output is consumed in China, the rest being exported.

The big increase in production of VCM and PVC in China has had a major effect on global trade in these products. The USA�s EDC trade has shrunk by over 40% since 1998. There has been a reduction in long distance VCM trade between regions. Trade in PVC between regions has also declined. Plans to produce EDC and VCM in the Middle East, targeted for export to Asia, have been put on hold.
Imports of PVC into China peaked in 2003, since when they have declined because of increasing Chinese output. At the same time PVC exports have mushroomed in the last two years, growing from almost nothing in 2004 to 500000 tons in 2006, 6.5% of world PVC trade.