Vinyl chloride

Chloroethylene Market Dynamics Report – Recent Commodity Market Intelligence

I. Price Trends
- Domestic Market: Chloroethylene prices in the domestic market have recently exhibited a weak and volatile trend. Taking PVC (polyvinyl chloride—the primary downstream product of chloroethylene) as an example, on July 3, the main futures contract for PVC closed at RMB 4,439.00 per metric ton, with a daily change of 0.00%, a high of RMB 4,450.00 per metric ton, and a low of RMB 4,413.00 per metric ton. In the spot market, Hangzhou’s PVC spot quotations remained firm: calcium carbide-based Grade V PVC was priced at RMB 4,370–4,550 per metric ton; Sanlian at RMB 4,380–4,400 per metric ton; Yihua/Jintai/Zhongtai at RMB 4,400–4,480 per metric ton; and Beiyuan/Tianye at approximately RMB 4,480–4,550 per metric ton.
- International Market: Global chloroethylene prices are influenced by multiple factors including geopolitical developments, feedstock supply conditions, and demand fluctuations. Recently, heightened Middle Eastern geopolitical risks significantly impacted the international chloroethylene market, causing volatility in crude oil and ethylene prices—and consequently affecting chloroethylene pricing. However, as the impact of the geopolitical conflict gradually subsides, international chloroethylene prices have begun to correct downward.

II. Supply-Demand Situation
- Supply Side:
- Domestic: Domestic chloroethylene production capacity continues to expand, and technological advances are enhancing industry concentration. Nevertheless, overall PVC plant operating rates have fluctuated recently; some upstream facilities conducted scheduled monthly maintenance, resulting in temporary output reductions. Yet, the net supply increase still outweighs maintenance-related losses. PVC output for July is forecast at 1.9516 million metric tons, indicating sustained market abundance.
- International: The global chloroethylene capacity landscape is evolving, with China maintaining a prominent position globally—thanks to its cost advantage derived from the calcium carbide route. Conversely, overseas ethylene-based production routes remain highly dependent on imported feedstocks and are thus more vulnerable to geopolitical tensions and raw material price volatility.
- Demand Side:
- Domestic: Downstream PVC product demand for chloroethylene has contracted both domestically and internationally due to seasonal lull, sluggish real estate activity, and weakening overseas demand. Downstream manufacturers—especially those producing rigid PVC products—maintain low operating rates and exhibit limited raw material procurement.
- International: Growth in global chloroethylene demand is primarily driven by infrastructure development and residential construction demand across the Asia-Pacific region. However, recent policy adjustments and monsoon-season effects in key importing countries such as India have led to seasonal contraction in import demand.

III. Cost Support
- Calcium carbide—a critical raw material for chloroethylene production—has seen stabilized pricing, providing a floor-level cost support for chloroethylene. Nevertheless, under prevailing supply-demand imbalances, this cost support exerts only limited upward pressure on chloroethylene prices.

IV. Market Sentiment and Policy Impact
- Market Sentiment: At the macro level, there is a lack of clear directional guidance; overall commodity market sentiment remains subdued, and trading activity is cautious—further constraining upside potential for chloroethylene prices.
- Policy Impact: Policy changes both domestically and internationally exert significant influence on the chloroethylene market. For instance, the cancellation of export tax rebates triggered an unprecedented surge in concentrated deliveries, while India’s reduction in PVC import tariffs provided short-term support to Chinese exports in Q2. However, the transient nature of such policies also adds to market uncertainty.

Analysis & Assessment

1. Pronounced Supply-Demand Imbalance: Although scheduled maintenance causes temporary supply reductions, the scale of curtailment is insufficient to offset continuous new-capacity commissioning and robust overall output—resulting in ample market supply. Meanwhile, demand has weakened concurrently on both domestic and international fronts due to seasonal lull, depressed real estate activity, and softening overseas demand. This fundamentally weak supply-demand dynamic is the primary driver behind persistently declining chloroethylene prices.
2. Limited Cost Support: While stabilized calcium carbide prices provide a modest floor, they cannot reverse the bearish trend amid structural oversupply.
3. Weak Market Confidence: Absence of decisive macroeconomic guidance and broadly subdued commodity market sentiment contribute to cautious trading behavior.
4. Heightened Policy Uncertainty: Frequent domestic and international policy shifts significantly affect the chloroethylene market, and their inherently short-term nature further amplifies market uncertainty.

Outlook

1. Short-Term (July): With continued supply expansion compounded by seasonal demand weakness, chloroethylene spot prices will remain under pressure. Prices are expected to persist in a weak, range-bound pattern at current low levels, offering little prospect for meaningful rebound.
2. Medium-Term (July–December): Should real estate indicators fail to show marked improvement, demand-side support will remain inadequate. Meanwhile, elevated operating rates and ongoing new-capacity additions will sustain supply-side pressure, likely keeping chloroethylene prices confined to low levels—or even pushing them lower. Temporary rebounds may occur if policy-driven stimulus emerges or unexpected supply disruptions arise—but any such rally would be limited in magnitude and duration.
3. Long-Term (2027 and Beyond): As industry capacity undergoes gradual adjustment and optimization—and potentially as the real estate sector recovers—supply-demand imbalances may ease. Consequently, chloroethylene prices could stabilize and gradually recover. However, the extent of recovery will depend on the degree of fundamental improvement and broader macroeconomic conditions.