US PVC export sentiment weakens on lower global demand

03 June 2011 16:21  [Source: ICIS news]

This is pipe made out of PVCHOUSTON (ICIS)--US polyvinyl chloride (PVC) export prices could start to fall as global demand has weakened, snapping a three-month uptrend triggered by the Japanese earthquake and tsunami in March, sources said on Friday.

“[Export demand] has slowed some, but not considerably,” one PVC producer said.

US PVC export prices were at $1,180–1,250/tonne (€814-863/tonne) FOB USG, as assessed by ICIS.

This week, US PVC export prices were widening further apart, as producers targeted prices in the $1,200s/tonne FOB USG, while buyers were aiming for prices into the low $1,100s/tonne FOB USG.

Excluding seasonal cyclicality, US PVC export prices have been rising since reaching a low point around $580/tonne FOB USG in April 2009.

The highest peak seen in US PVC export prices in recent years was December 2005, when PVC prices averaged $1,475/tonne FOB USG.

In March and April, export demand for US PVC was brisk, with prices in the $1,200s/tonne FOB USG.

Consumers were active in what one market participant described as a “buying frenzy” in the weeks after the March 11 Japanese earthquake and tsunami, as concern over supply disruption were at the forefront.

As a result, buyers appeared to be well-covered in their positions, sources said. This, combined with higher PVC export prices, has softened demand.

“In the international market, demand has been drying up, little by little,” said another PVC trader.

Some sources indicated that US export prices could continue falling as demand continues to erode. 

US PVC players are viewing June as a quiet month for exports, with global buyers sidelined and a drop-off in activity from Asia.

Domestic demand in the US for PVC has remained bleak, shown by numerous economic indicators demonstrating downslides or stagnation in the housing market.

An index of US home prices plunged by 4.2% in the first quarter, falling past the previous low point of April 2009, according to Standard & Poor’s (S&P) monthly report.

US April pending home sales dropped 11.6% in April from March, said the National Association of Realtors, reflecting pessimism in the housing market that has depressed new home starts, a key segment of the PVC market.

In addition, a key measure of manufacturing activity dropped by 6.9 percentage points in May from April - the largest one-month decline since 1984, according to the Institute of Supply Management (ISM).

US job growth fell sharply in May, with employers adding only 54,000 workers in the month and pushing the unemployment rate up to 9.1%, the Department of Labor (DOL) said.

One US PVC market participant viewed the slowdown to continue into at least 2012.

“Until building bounces back, these guys really don’t have much hope,” the source said.

Major US PVC producers include Shintech, Formosa Plastics, Westlake, OxyVinyls and Georgia Gulf.

($1 = €0.69)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
For more on polyvinyl chloride visit ICIS chemical intelligence

By: Ruth Liao
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