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Demand analysis of PVC substitutability

May 31, 2021

Cntg


From the downstream demand of PVC, pipe, profile, floor and plate account for more than 60%. In the field of plastic pipes, PVC, PE and PP pipes account for the top proportion, and their own properties lead to different application fields. There is no absolute substitution among them for the time being. However, with the increasing supply capacity of PE and PP raw materials, their superior properties will form a partial substitution for PVC in more fields. In the field of profiles, PVC based plastic steel doors and windows are suffering from the impact of aluminum alloy doors and windows market, but they still occupy the low-end market with their price advantages. In recent years, flooring and panels have been growing continuously, becoming the third largest downstream field of PVC. In the future, with the continuous promotion in the domestic residential field and the stable demand in the overseas market, PVC flooring will gradually replace other types of panels with its superior performance, becoming a new growth point to drive the demand of PVC.

one

Introduction of PVC demand

In terms of product classification, PVC belongs to the synthetic Resin among the three major synthetic materials (synthetic resin, synthetic fiber and synthetic rubber), and the five major resins include polyethylene PE, Polypropylene Pb, polyvinyl chloride PVC, polystyrene PS and ABS resin. PVC used to be the most widely used plastic in the world. From the current world and domestic consumption, PVC ranks third, second only to PE and Pb.

PVC downstream products mainly include two types, one is hard products: pipe fittings, profile doors and windows, hard sheets and other sheets; Among them, pipes and profiles are the most important downstream demand, accounting for more than 50%. As the most important downstream demand, pipes maintain a high growth rate, leading real estate and construction enterprises have higher orders, and the consumption of PVC raw materials has increased significantly. In recent years, the demand for profiles has declined.

The other is soft products: flooring and other flooring materials, films, cable materials, artificial leather, shoes and sole materials, hoses, toys, etc. in recent years, the export demand of PVC flooring has increased, becoming a new direction of PVC demand growth.


2 pipe replacement

At present, China has become the largest producer of plastic pipes, with more than 3000 large-scale plastic pipe enterprises in China, with an annual production capacity of more than 30 million tons. In recent years, the total output of the plastic pipe industry has increased steadily, but the growth rate has declined. From 2016 to 2019, the year-on-year growth rates are 4%, 6%, 3% and 2.5% respectively. The growth rate of the industry has slowed down slightly. In 2020, the output is expected to be 16.7 million tons, with a year-on-year growth rate of about 4%.

In terms of the proportion of plastic pipe consumption, PVC, PE and PP pipes account for 43.6%, 31.2% and 10.8% respectively in 2019, and PVC pipes account for the first proportion. However, PE pipes are expected to replace PVC pipes in terms of pipe performance.

If only from the simple calculation of pipeline quantity and market share, in 2019, 16.06 million tons of pipeline will be produced, and PVC pipe will account for 43.6%, corresponding to 7.02 million tons of PVC pipeline. In 2020, the total amount of pipeline is expected to be 16.7 million tons. According to the average decline rate of PVC market share in the past five years, it is estimated that 40.9% of PVC pipe will account for 6.83 million tons in 2020

At present, domestic PVC is mainly made of calcium carbide, mature industrial chain supporting system and sufficient raw material supply, making PVC pipe still occupy more than 40% of the market share in plastic pipe.

PVC pipes occupy a certain advantage in the early stage of the development of the plastic pipe industry. However, with the development of the industry, the market has new requirements for the quality, performance and environmental protection of the pipes. In addition, the domestic supply capacity of PE and PP pipes is constantly increasing, and the substitution of PE and PP pipes for PVC pipes is obvious. However, PVC pipes rely on their historical and price advantages, At present, plastic pipes still account for the largest proportion. But in the future, with the increasing application of PE pipe and the gradual promotion of PP pipe in the field of building water supply pipe, it is expected that the substitution of PP and PE pipe for PVC pipe will continue, especially the substitution of PE pipe for PVC pipe will be more obvious.

PE pipe is nontoxic and can replace PVC pipe in the field of water supply pipe. However, from the perspective of their main application fields, PVC, PE and PPR pipes can correspond to the front end of real estate, municipal engineering and back end of real estate, and there is no absolute substitution for them.

PVC pipe is widely used in drainage system, including municipal drainage and building drainage. The municipal drainage pipeline will maintain an annual growth rate of 7% - 8% in the future, which will still drive the demand for PVC pipes.

Based on the calculation of municipal pipelines, according to the economic indicators for the transformation of old residential areas in Beijing (2017), the application of pipes in the water supply and drainage system transformation project is 0.64M per square meter. According to the 14th five year plan, if the water supply and drainage transformation of 4 billion square meters of old residential areas in China is carried out, the corresponding pipe demand is 2.56 billion meters. In addition, the single consumption of pipe material corresponding to the reconstruction of thermal external line is 2.31M, and the single consumption of pipe material corresponding to the replacement of sewage and rainwater external line is 1.5m, which is 3.81m in total. The length of external line and corresponding pipe material required by the old residential area with an area of 4 billion square meters is 120 million meters and 457 million meters, respectively, and the total pipe material demand is 3.017 billion meters. PVC pipes are mainly involved. Assuming that the average unit price is about 7 yuan / M and the average price of PVC pipes is 9000 yuan / T, it is estimated that 2.3 million tons of PVC pipes will be needed.

Driven by the future real estate and municipal transformation, PVC has a certain growth space, but with the improvement of PE and PP pipe supply capacity and the improvement of cost performance, it is expected that the substitution of PVC pipe will continue to increase in the future.

3 profile substitution

PVC profile is a kind of PVC product which is extruded by high temperature after adding various additives to Pvc Resin. Profile is the second largest demand of PVC downstream, accounting for about 20%. Profile doors and windows mainly include wood windows, steel windows, plastic steel windows, aluminum alloy windows, etc. In the application field, the overall anti deformation advantage of aluminum alloy is better than that of ordinary plastic steel (the curtain walls of office buildings and hotels are made of aluminum alloy). Plastic steel has the advantages of low heat transfer coefficient and good thermal insulation performance, so it is widely used in the north. In recent years, the thermal insulation technology of aluminum alloy doors and windows has been relatively mature, and the thermal insulation performance is also very good, so the current market is still dominated by aluminum alloy, while plastic steel mainly occupies the relatively cheap low-end market.


From the perspective of market rate of doors and windows, aluminum alloy doors and windows account for 55%, and plastic steel windows occupy more low-end market due to their low price. Compared with the traditional aluminum alloy doors and windows, the thermal insulation performance of plastic steel windows is more superior, so it has a higher market share in the cold north. With the improvement of manufacturing process of new aluminum alloy doors and windows and the reduction of cost, the replacement of plastic steel doors and windows will continue.

4 floor decoration replacement

Floor decoration materials are highly related to real estate and architectural decoration, and are widely used in shopping malls, hotels, office buildings, hospitals and other public buildings and residential areas. It is estimated that the market scale will reach 331.78 billion US dollars in 2020, with a compound growth rate of about 5% from 2015 to 2020. With the slowing down of the epidemic situation and the gradual recovery of the world economy, the development of the floor decoration material industry will be broader in the future. In terms of global capacity distribution, due to the advantages of labor cost, the industry has been transferring to developing countries, and China has undertaken most of the capacity.

Floor decoration materials are mainly divided into wood floor, ceramic tile, natural stone, carpet and PVC floor according to the structure and materials. PVC floor with PVC as the main raw material, add Plasticizer and other accessories, extrusion. PVC is a kind of environment-friendly and non-toxic renewable resources. With the enhancement of environmental awareness, PVC floor has gradually replaced wood floor and other traditional floor decoration materials in the United States, Europe and other developed countries and regions. In China, floor and board have become the third largest demand side of PVC downstream in recent years, and PVC floor will become the main growth point of PVC in the future.

PVC flooring industry in USA

In 2018, the market share of PVC flooring in the US floor decoration materials increased from 9.80% in 2007 to 21.40%, which has become the second largest floor decoration material in the US. It is expected that with the continuous strengthening of consumers' environmental awareness in the future, the substitution effect of PVC floor for traditional floor decoration materials will gradually appear.

PVC flooring in the United States extends from commercial buildings to residential buildings. The market sales increased from US $895 million in 2013 to US $3.430 billion in 2018, with a compound annual growth rate of 30.83%. Due to the increase of labor costs, most American enterprises produce by means of overseas OEM. In recent years, the import volume of PVC flooring in the United States has increased year by year, reaching US $3.345 billion in 2019. With the continuous improvement of the technical level of foreign suppliers, domestic enterprises in the United States changed to focus on purchasing finished products. China is the main importing country of the United States. The continuous expansion of PVC flooring demand in the United States market has a certain stimulating effect on China's flooring manufacturers.

Most families in China only change their floors when they change their houses, and only one or two times a house changes its floors. However, American residents often choose to change their floors when they change their rental houses or the decoration style of their houses. A house changes its floors more frequently. The demand for PVC floors in the secondary decoration market in the United States accounts for more than 50% of the total consumption. Therefore, although the growth rate of real estate in the United States is slowing down, But the future stock of real estate will still drive the demand for PVC flooring.

European PVC flooring industry

European PVC flooring market development is more mature, consumer awareness is generally high. Among all kinds of floor decoration materials imported from EU, PVC elastic floor accounted for 15.16% in 2011; By 2018, it will rise to 28.53%, and the share of other floor decoration materials will decline to varying degrees, with obvious substitutability. The consumption concept and habits in Europe are similar to those in the United States. The wide application of PVC flooring in the European market will also improve the development of PVC flooring industry in the domestic market to a certain extent.

PVC flooring industry in China

PVC flooring produced by domestic enterprises is mainly used for export. Even under the global epidemic in 2020, the export growth rate of PVC flooring has not slowed down, and the overseas demand is stable. The United States is the main exporter of PVC flooring in China.

Compared with developed countries, the domestic PVC floor market scale is still at a low level. Affected by the low public acceptance, China's PVC floor is mainly used in schools, hospitals and other public areas, and less used in commercial housing. In 2019, China's PVC floor will account for less than 5% of the demand for floor decoration materials.

China's low labor and raw material costs have laid a solid foundation for domestic enterprises to produce PVC flooring. In the future, the increase of PVC flooring production and sales will exceed that of any other flooring materials. It is expected that in the next 50 years, PVC flooring is expected to greatly replace laminate flooring and composite flooring, and then greatly increase the market share to about 8% - 9%.

Compared with the developed countries in Europe and America, China has a huge population base, but its urbanization rate is relatively low. In the future, the urbanization rate will be in the long-term promotion stage, which will promote the medium and high-speed development of China's real estate industry. In 2019, China's urbanization rate will reach 60.60%. If the annual average growth rate of urbanization is 1%, the new urban population will be 13 million. According to the calculation of 30 square meters per capita housing area of urban population in China, it will bring 390 million square meters of housing demand every year. In addition to housing, the improvement of urbanization rate will also increase the corresponding shopping malls, hotels, office buildings, hospitals, schools, stadiums and other supporting facilities, which will bring a broad market space to the PVC floor industry.

In 2021, with the good progress of epidemic prevention and control, the newly started area and sales area of China's real estate industry will gradually return to the level before the epidemic. The overall recovery of the real estate industry is bound to drive the demand for decorative materials such as flooring.

Secondly, compared with foreign developed countries, the proportion of fine decoration in China is only 32% in 2019, while the proportion of fine decoration in foreign countries has reached more than 80%. In the future, with the increase of the proportion of fine decoration in real estate, PVC flooring enterprises will cooperate with real estate enterprises to penetrate into the home decoration market in a large area, further broaden the application scope and become a new round of growth point.

In summary, from the analysis of downstream demand of PVC, the field of PVC pipes is gradually replaced by PE and PP pipes; PVC profiles are facing the challenge of aluminum alloy profiles; However, PVC floor is gradually replacing other floor decoration materials and becoming the main growth point of PVC downstream demand. In the short term, with the recovery of PVC terminal demand for real estate and construction, the market share of PVC pipes and profiles has declined, but the total demand remains at a high level. Secondly, PVC flooring maintains a relatively high growth rate due to its good performance. Overall, the demand for PVC will continue to grow steadily. In the long run, pipes and profiles occupy half of the downstream of PVC, but as they are gradually replaced by other materials, it will slow down the growth of PVC demand. In the future, we need to pay attention to the changes in the market pattern of pipes and profiles.

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