Housing, cheaper ethane boost US vinyls stocks by more than 20%

12 January 2012 22:23  [Source: ICIS news]

HOUSTON (ICIS)--A combination of cheaper feedstock costs and the prospects of a housing recovery have boosted stock prices for US vinyls producers by more than 20% in the past two weeks, an analyst said on Thursday.

Producers of polyvinyl chloride (PVC) rely on ethylene as a feedstock.

Unlike much of the world, US ethylene producers rely on natural-gas-based ethane instead of oil-based naphtha as a feedstock. The advent of shale gas has increased the nation's supplies of ethane, giving producers a cost advantage.

Already, the trend has boosted stock prices for producers in the ethylene chain.

US-based Dow Chemical is up by about 15% since 28 December. During the same time, Eastman Chemical and LyondellBasell both rose by about 20%.

All three companies own ethane crackers.

However, stock for PVC producers Westlake Chemical and Georgia Gulf  have risen by about 30% during the same period.

On Thursday alone, Westlake closed at $51.24, up 6.37%. Georgia Gulf closed at $24.48, up nearly 5.56%.

"In my view it’s a combination of better US housing prospects and cheaper ethane-based costs," said Hassan Ahmed, an analyst at US-based Alembic Global Advisors.

According to the National Association of Home Builders, the US housing market should begin to recover in 2012 and reach a near normal pace of construction in 2013.

Additional reporting by William Lemos and Joe Kamalick

For more on ethylene or PVC visit ICIS chemical intelligence

By: Al Greenwood
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