The impact of the expiration of India's anti-dumping policy on China's PVC export

At the beginning of this month, India's anti-dumping policy (add) on PVC imported from China and the United States officially expired. At present, no new policy has been announced. For China, the vacuum period of anti-dumping policy is the key period to expand exports.

As the re export volume is not large, the expiration of the anti-dumping policy will bring the marginal increment of PVC export; Export increment depends on the length of time the policy window is opened and the strength of PVC cost advantage between China and the United States.

1、 Analysis of PVC supply and demand in India

1. Capacity analysis

India's production capacity and output: India's existing PVC production capacity is 1.593 million tons, and the domestic production capacity is seriously insufficient. The unit operates at high load all year round, which is more than 80% in normal months and more than 85% in high days. Maintenance is usually carried out in March and April of the first half of the year and September and October of the second half of the year.

In terms of existing capacity, reliance (reliance group), which has the largest capacity, has a PVC capacity of 735000 tons, and chemplas and finolex have 366000 tons and 272000 tons of PVC paste resin capacity respectively.

In terms of new production, Adani group of India plans to invest 2 million tons of calcium carbide PVC (1.3 million tons of caustic soda). If the approval is successful, it will be put into production around 2026. India's production capacity will hardly expand on a large scale in the next 2-3 years.

There are some reasons for India's long-term shortage of production capacity:

1) Most PVC processes in India use imported dichloroethane or vinyl chloride monomer as raw materials to produce PVC. The shortage of ethylene supply makes it difficult for most petrochemical plants to go to new facilities;

2) The new PVC production plant also needs to consider the problem of chlor alkali balance, and additional investment is required, which greatly reduces the investment attraction of the project;

3) The electrolysis process needs to consume a lot of power, and the normalization of power shortage and high power cost seriously limit the increase of PVC production in India.

2. Demand analysis

At present, India has strong demand for PVC and great growth potential. It is estimated that India's per capita PVC consumption in 2021 is only 2.4kg, far lower than the global average of 6.35kg In the next five years, the per capita consumption of PVC in India is expected to reach 3.3 kg, that is, the annual demand of 4.62 million tons.

In recent years, the Indian government has gradually increased its investment plan to improve the supply of food safety, housing, infrastructure, electricity, public drinking water and so on.

Therefore, in the field of life, 50 million new houses and toilets for 120 million families need to be built, as well as a large number of supporting drainage pipes, joints and other facilities; In the field of agricultural production, irrigation using agricultural water for all farmers is becoming popular. In fiscal year 2015-2019, the relevant budget scale is up to rs. 500 billion, and the demand for PVC as raw material is also increased accordingly.

Pipes and fittings account for about 73% of India's total demand. More and more PVC pipes replace metal and cement pipes; Consumption in wire and cable, film and sheet applications is also growing rapidly; Compared with wood, the demand for PVC profiles with higher cost performance is rising.

3. Analysis of PVC import and export in India

1) India's PVC exports are minimal

India's PVC export volume is below 5000 tons all year round, which is negligible compared with the import volume. In 2020, due to the impact of the epidemic blockade policy and the long rainy season, India's domestic demand was insufficient, and the export window was opened. The annual export volume was 76000 tons of PVC, of which 96% was exported to China.

From the perspective of import structure, China, China, Taiwan, Japan and Korea have been the main source of PVC imports in India. Taiwan has been the largest source of imports in India since 2009. After India and Japan signed the free trade agreement, Japan has preferential policies for exporting to India. The PVC import tariff has been adjusted to 0.7% from April 2020 and zero in April 2021. Japan has occupied the first place in India's PVC import list since 2019.

2、 History and influence of anti-dumping

1. India's anti-dumping process against China

Reliance (reliance industry) mentioned above is the most profitable company in India. Its revenue accounted for 2.13% of the national GDP in 2021, and about a quarter of Indian investors hold its shares. In order to protect its PVC suppliers, India has started a 16 year anti-dumping trip since 2006, and imposed anti-dumping duties on PVC imported from most countries in Asia and the United States.

2. The impact of India's imposition of anti-dumping duties on China

Before the anti-dumping investigation, China was the largest importer of PVC in India. It can be assumed that if there is no anti-dumping since 2006, China will probably become the main importer of India for a long time. After India imposed anti-dumping duties, China's exports of PVC did not take the lead. India's import volume from China decreased significantly, and this demand shifted to China, Taiwan, Japan and Korea.

3、 The impact of the cancellation of anti-dumping duties in history

We deduce the impact of the cancellation of anti-dumping duties from historical events.

1. From January to may 2014, India temporarily cancelled its anti-dumping tax rate on PVC in China

China's PVC enterprises seize the opportunity to seize the export market. India's imports from China increased from 5000 tons in 2013 to 84000 tons in 2015.

2. In April 2014, the sunset review in India cancelled the anti-dumping duty of South Korea

Before 2014, India imported less than 50000 tons of PVC from South Korea. After the abolition of South Korea's anti-dumping tax in 2014, the import volume soared to 363000 tons in 2018. Since 2015, South Korea has been in the top 4 of India's PVC importing countries.

3. In October 2019, China cancelled the anti-dumping duties of the United States, South Korea, Japan and Taiwan

The Ministry of Commerce issued the announcement of the Ministry of Commerce on terminating the end of the anti-dumping review investigation of imported PVC originating in the United States, South Korea, Japan and Taiwan. From September 29, 2019, no anti-dumping duty will be levied on imported PVC originating in the United States, South Korea, Japan and Taiwan.

After the anti-dumping duty was abolished, China's imports from Korea, Japan and China Taiwan gradually increased.

The sharp decrease in imports from the United States is mainly due to the decline in the operation of American devices affected by the epidemic and extreme weather; The increase of crude oil price leads to the weakening of cost advantage; The real estate industry in the United States has a high demand for PVC.

On the whole, the cancellation of anti-dumping duties will enhance the price advantage of PVC exporting countries and be conducive to PVC export.

4. Entrepot trade should also be considered

In international trade, in order to avoid anti-dumping duties, some exporters will first transport the goods to a third country for customs clearance, change containers, issue documents such as the certificate of origin of the third country, and then re export to avoid anti-dumping duties. However, after calculation and consultation with traders, this part is not large:

1) From the data, even if there is entrepot trade, the trade volume is not large

First, we may select possible transit places from the countries or regions around India: China Taiwan, China Hongkong, Thailand, Malaysia, Philippines, Sri Lanka and Singapore. By comparing the data of China's exports to these countries and regions and those of these countries and regions to India, the volume of re export trade is not large.

Then select Thailand and Malaysia with relatively large import volume for import analysis. It can be seen that the amount of PVC imported by India from Malaysia is not large.

2) Judging from the collection of anti-dumping duties, the advantage of entrepot will not be too great

India imposes anti-dumping duties on Malaysia, Thailand and other countries. Even if the rhythm and amount of anti-dumping duties imposed by India on the two countries are inconsistent with those imposed on China, the turnover from Thailand and Malaysia is feasible, but in absolute terms, it may only be tens of thousands of tons per year, which has little impact.

4、 The impact of the expiration of this anti-dumping duty

1. What is the impact on exports?

Before the introduction of the new policy, India did not charge import anti-dumping duties, and Indian domestic enterprises also stepped up efforts to purchase low-cost Chinese calcium carbide PVC and American PVC raw materials. We have learned from exporters that China's exports to India have increased in the past two weeks.

At the same time, we should also recognize that India's anti-dumping policy against the United States expires at the same time. Although the operation of American devices has been unstable due to the impact of epidemic and extreme weather since 2020, with the reduction of adverse effects on the supply side and the return of American devices, the number of PVC in the United States is increasing in the international market. The United States has an export scale of 2-3 million tons and a relatively low cost. Once the anti-dumping is cancelled, the export volume of the United States to India will increase significantly. In the Indian PVC market, the United States will be China's most direct competitor.

2. Cancel for a long time?

India's PVC giant has a certain political influence. Several anti-dumping investigations have proposed to the government that the profit seeking nature of capital and the protection of its own economy may lead to the complete end of the anti-dumping policy until India's PVC production capacity can be self-sufficient.

Although it is uncertain whether to levy anti-dumping duties again, it is certain that the export volume of PVC this year is better than expected.