Chinese policy shift likely to aid domestic plastic pipe companies

The Chinese finance ministry has recently announced the removal of value-added tax (VAT) export rebates on suspension PVC (SPVC), which will be effective from April this year

Stocks in the plastic pipe segment have been reeling from weak demand, intense competition, rising capacity additions, and soft polyvinyl chloride (PVC) prices. Listed stocks are down an average of 23 per cent over the past year, with Prince Pipes and Fittings shedding the most at 39 per cent.

 

The sector, however, could see some relief following export-tightening measures by the Chinese government, which is seeking to curb oversupply in PVC capacity and discourage high-volume, low-margin exports.

 

China’s finance ministry has announced the removal of value-added tax export rebates on suspension-grade PVC (S-PVC), effective April this year. This move is expected to reduce the competitive advantage of low-priced Chinese exports, say analysts led by Dharmesh Shah of JM Financial.

 

In the seven months of 2025-26, India imported 1.5 million tonnes of S-PVC, accounting for 60–65 per cent of domestic requirements; of this, about 50 per cent was sourced from China. In the near term, export front-loading from China could lead to temporary price softness over the next few months. However, higher export costs and any moderation in Chinese shipments are likely to tighten global supply conditions and support PVC prices over the medium term, the analysts add. Supreme Industries remains JM Financial’s top pick in the sector. 

 

Prabhudas Lilladher also believes exporters may front-load shipments ahead of the implementation, which could result in temporary pricing pressure in the first quarter of calendar year 2026. Over the medium term, a potential reduction in Chinese PVC exports by 10–20 per cent could tighten global supply and support prices, says analyst Praveen Sahay of the brokerage. Historical instances of rebate reductions in oil products and PVC suggest exporter margins tend to compress materially, leading to less aggressive pricing in offshore markets.

 

Prabhudas Lilladher expects larger players with strong brands and distribution networks to gain market share in such an environment. The brokerage remains positive on Astral Pipes, which has outperformed peers, citing strong growth visibility, margin resilience, and strategic backward integration.

 

While volume growth assumptions are pegged at 15 per cent over the next two years, PVC resin prices could rise if anti-dumping duties are imposed in the future. This may occur if large conglomerates such as the Reliance or Adani groups scale up PVC resin capacity.

  Antique Stock Broking also expects near-term turbulence for the sector, led by the withdrawal of the Bureau of Indian Standards Quality Control Order and the non-implementation of anti-dumping duties on PVC in November 2025. The domestic industry has already been under pressure due to a steady surge in imports of S-PVC and chlorinated PVC, which has weighed on realisations. As a result, average domestic PVC prices corrected by 9–10 per cent in the October-December quarter.

 

Analysts Manish Mahawar and Roshan Nair of the brokerage note that company realisations are inching closer to pre-pandemic levels despite value addition and rupee depreciation. As a result, they expect a lower risk of inventory losses in the coming quarters, which could bring long-awaited earnings stability, particularly from 2026-27 onwards. Supreme Industries is their preferred pick in the sector.