Dow Chemical predicts 1-3 years before US housing market recovers

23 June 2011 07:47  [Source: ICIS news]

SINGAPORE (ICIS)--Dow Chemical is predicting that it will be one to three years before the US housing market returns to normal capacity, a senior official at the petrochemical major said on Thursday.

The housing market is a key end-user of petrochemicals. According to Dow, the US housing market is operating at 25% of its usual capacity.

The weakness in the US housing market has caused a depression in polyvinyl chloride (PVC) demand, Carlo Gurano, global business director – chlor vinyl and caustic at Dow, said in a speech at The 15th World Chlor-alkali Conference in Singapore.

Nevertheless, this has been counterbalanced by PVC exports to emerging markets, where construction growth is firm, keeping the US PVC market balanced.

As domestic housing markets recover, internal US consumption will surplant exports, Gurano said.

The housing outlook for PVC domestic demand remains pessimistically grim. The National Association of Home Builders (NAHB) said that its June survey of residential housing contractors, known as the housing market index (HMI), fell to 13, among one of the lowest seen since September last year.

On the 1-100 HMI scale, a reading of 50 or above indicates that home builders are confident about their prospects for the next six months.

Overall sentiment is bearish in the US PVC market, particularly in exports,  where prices fell by $50/tonne (€35/tonne) to $1,050-1,150/tonne FOB (free on board) USG (US Gulf) because of weak demand during the week ended 17 June.  PVC producers are seeking to maintain their price levels and prevent prices from sliding further, both in exports and contract prices.  The US housing market, which accounts for a majority of the PVC that goes into building and construction, remains depressed.

The 15th World Chlor-alkali Conference runs from 23-24 June.

($1 = €0.70)

Additional reporting by Ruth Liao

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By: Mark Victory
+44 208 652 3214

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