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US PVC market optimistic on construction rebound
Posted on December 6th, 2016 by Bill Bowen in Chemicals Industry News and Analysis
The slowly improving US construction market is boosting optimism and sales in the US polyvinyl chloride (PVC) market.
Privately-owned housing starts in October were at a seasonally adjusted rate of 1.32m, up 26% from September’s revised figure and up 23% above the October 2015 rate of 1.1m, according to the US Census Bureau.
Construction permits and housing completions are also up significantly in October, although at slightly lesser rates of improvement, according to the Census figures.
This comes as the first significant snowfall of the 2016-17 winter season hit in the northeast US, reminding PVC market participants that the end of construction season is arriving for the plastic that is largely consumed by construction purposes.
But PVC market participants see the recent figures and discussion of a possible Trump economic stimulus bill as optimistic portents for 2017.
“If that happens, it is going to be really good for the PVC market,” according to one PVC trader. And the evidence for that optimism is growing.
US and Canada October PVC production was up 18% from the same month in 2015 and put 2016 production 6% above the first 10 months of 2015, revised figures from the American Chemistry Council (ACC) reveal.
October exports were up 30% from October 2015 and domestic sales and captive use of 910m lb came in at a 6% increase from the year-ago period, according to the ACC data, complied by Vault Consulting.
So far this year, production is up 6%, exports are up 6.6% and domestic sales and captive use are up 4.9%, according to the ACC/Vault Consulting data.
Sales to all domestic end-use segments are up, as well, with sales of calendered material for film and sheet packaging material being the notable exception.
But it is in construction that real sales expansion is happening.
Sales of resin to make vinyl flooring are up 9.4% through October and sales for pipe and tubing up 6.6%. Sales to make building supplies are up even more sharply, up 23% for fencing and decking material and 20% for extruded doors and windows and up 20% for extruded film and sheet.
Sales to make wire and cable insulation are essentially flat, up less than 1%, according to the ACC Vault figures.
The increased construction activity has aided US PVC producers to elevate domestic contract prices. Those prices have increased by 8 cents/lb through increases accepted in the market since March, according to the ICIS assessment.
But contract prices are expected to decline in November and probably December as lower ethylene costs in the US market erased the justification of the most recent 2 cent/lb increase in October.
North American PVC production is likely to be enhanced in 2016 with the addition of production capacity by Shintech and new ethylene capacity.
Shintech is adding 150,000 tonnes/year of production capacity at its Louisiana production centres in Plaquemine and Addis, Louisiana, that is expected online during the latter part of Q1.
Occidental Petroleum executives said the company expects commissioning of its 1.2bn lb/year ethane cracker joint venture with Mexichem in Ingleside, Texas, to begin in mid-January and for commercial delivery of ethylene to start during first quarter 2017.
The cracker is a 50:50 JV with Mexichem and will produce 544,000 tonnes/year of ethylene. Oxychem will then use the ethylene produced to make vinyl chloride to be shipped to Mexichem’s vinyls plants in Mexico and Colombia to make polyvinyl chloride (PVC).
Those expansions will likely be an aid to US export volumes as prices in Asia, particularly in China, have risen in recent months on reduced output because of high feedstock costs and new environmental concerns.
“Demand continues to go up in China,” the trader said. “That is helping everybody.”
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All opinions shared in this post are the author’s own.
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Senior Markets Editor & Manager – Americas, ICIS
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