Since late 2025, stocks related to polyvinyl chloride (PVC) have shown significant gains. While PVC commodity prices have also risen somewhat, this is largely interpreted as a rush to export ahead of the policy ending export VAT rebates after April 2026. As a typical high-energy-consumption product, PVC shares considerable similarities with electrolytic aluminum, yet their market fortunes have diverged dramatically over the past few years. Looking ahead, however, the factors that have previously suppressed PVC's market conditions are shifting, suggesting that the asset value of PVC is poised for a potential revaluation.
The primary driver for this revaluation is the structure of demand. Both PVC and electrolytic aluminum are high-energy-consumption products where electricity is the most critical factor of production. For a long period before 2022, the economic output per kilowatt-hour of electricity was essentially the same for both. Post-2022, however, a significant divergence occurred. By 2026, the output value generated from consuming one kilowatt-hour of electricity in producing electrolytic aluminum is more than double that of the calcium carbide-based PVC process. The main reason for this divergence since 2022 stems from changes on the demand side. PVC demand has been negatively impacted by the domestic real estate sector, leading to a decline in internal consumption. In contrast, electrolytic aluminum has experienced rapid demand growth, driven by the expansion of the photovoltaic industry. Looking forward, the demand structure for PVC has largely undergone a major adjustment. If emerging developing nations can maintain their growth momentum, China's PVC demand could potentially replicate the structural transformation seen in electrolytic aluminum post-2022, paving the way for a revaluation of PVC's asset value.
The energy attribute serves as the anchor for this revaluation value. The prevailing market view attributes the strong conditions in China's electrolytic aluminum sector to the "45 million ton capacity cap" policy. While the PVC industry lacks a similar explicit regulation, the government has effectively drawn an implicit red line based on carbon emission intensity. Calcium carbide-based PVC not only currently has low output value per unit of carbon emissions but also has very limited potential for future green improvements, while still accounting for a significant portion of exports in its demand structure. Therefore, within the dual carbon goals framework, calcium carbide-based PVC can be considered one of the least attractive products from an industrial policy perspective. For ethylene-based PVC, although its energy consumption and carbon emissions are lower than the calcium carbide method, its production capacity is predominantly located in eastern coastal regions. From a broader perspective, it is also unlikely that local governments would prioritize allocating limited resources to ethylene-based PVC. Finally, internationally, there is an implicit capacity constraint for PVC: power generation capability. China's power generation capacity is currently unparalleled in other parts of the world, making large-scale industrial transfer of PVC production unlikely.
Calculations indicate that typical electrolytic aluminum enterprises achieved a profit of approximately 0.21 yuan per kilowatt-hour in 2024. If PVC profitability were to recover to a comparable level, it would imply that PVC profit per ton could exceed 1,500 yuan.
Regarding investment recommendations, key players in the PVC sector include Zhongtai Chemical, Xinjiang Tianye, Beiyuan Group, Erdos, Tianyuan Co., Ltd., Jiahua Energy, Chlor-Alkali Chemical, and Wanhua Chemical. Most of these companies are among the more competitive within the PVC industry. However, affected by the industry's current weak conditions, the profitability of their PVC businesses is generally poor; for instance, Xinjiang Tianye forecasted a slight loss for the full year 2025. Should PVC profitability reach the levels anticipated above, the earnings of these enterprises would see significant improvement.
Potential risks include changes in dual carbon policies, significant fluctuations in oil prices, shifts in the development trajectory of emerging nations, and variations in assumptions affecting calculation outcomes.