05 February 2013 23:13 [Source: ICIS news]
By Ken Fountain
HOUSTON (ICIS)--In the ?xml:namespace>
Since the worldwide financial crisis – in large part spurred by the
For producers of polyvinyl chloride (PVC) and other chlorine derivatives, that anticipation has been tremendous. PVC, a thermoplastic polymer made from chlorine and ethylene, is used extensively to manufacture construction materials such as piping, siding, window frames and flooring.
At various points in the past few years, there have been hints that homebuilding was going to pick up steam. All too often, those hopes faded.
But over the past several months, there have been more positive signs – including confidence measures of consumers and builders alike – that a nascent rebound in the construction sector may finally take hold.
On 16 January, for instance, the National Association of Home Builders (NAHB) said its monthly measure of builder confidence, called the Housing Market Index, was at 47 (on a 100-point scale), unchanged from December and the highest levels since April 2006. A score of 50 or more indicates positive sentiment.
The NAHB also said its gauge of current sales conditions remained at 51, while the component gauging sales expectations for the next six months fell a point to 49. The component gauging traffic of prospective buyers gained a point to reach 37.
The next day, the US Commerce Department said total new home production in December was a seasonally adjusted annual rate of 954,000 units, a 12.1% increase over November’s figure and the highest level since June 2008, just as the downturn was beginning. That figure includes both single-family, considered the core of the homebuilding sector, and multi-family, which in recent months has seen the highest gains.
Nationally, average prices for both new and existing homes – which had been driven down by the bust and thus dampened activity – have also been rising, although there are still problem states such as
Bob Denk, an economist and assistant vice president of forecasting and analysis for the NAHB, said that earlier rebounds in the housing market were largely driven by external factors that did not reflect fundamentals.
Most notably, Denk said the federal tax credit for new homeowners that was enacted during the height of the financial crisis in early 2009 helped put a floor under the home construction sector.
But when that tax credit expired in April 2010, Denk said, construction again fell into a fallow period.
Denk said the latest figures – particularly the measures of builder and consumer confidence – lend credibility to the idea that, this time, the long-awaited homebuilding rebound is going to stick.
“We’ve seen some unassisted improvement,” Denk said, meaning that increasing housing starts reflect an actual upturn in actual demand without the previous tax credit.
The gradual but steady recent increase in home prices also bodes well for a true rebound, Denk said.
“We think the recovery is on a credible upward trend and will continue to gain momentum going forward,” he said.
That's welcome news for US producers of chlorovinyls such as PVC. Since the downturn began, domestic demand for PVC and other vinyls has been well below the levels seen in the boom years.
While producers were able to move their wares to healthier overseas markets, especially in Asia and
Dick Doyle, CEO and president of the trade group The Vinyl Institute, said producers of PVC and other vinyl-based products are “guardedly optimistic” about the potential rebound in the homebuilding industry.
And it’s not only new-home construction that will provide an outlet for US-made PVC and other vinyls, Doyle said. Renovation and remodelling of existing homes, as well as commercial construction, will also drive demand.
There are also “huge opportunities” for PVC in the replacement of the country’s aging infrastructure, such as municipal water lines, Doyle said.
In addition to a return of buyers’ demand for housing, Doyle said the advent of increased production of shale gas brought on by hydraulic fracturing and horizontal drilling is creating an energy and feedstock advantage that will put US producers in good stead for years to come.
But Doyle offered a major caveat: Improvements in the homebuilding sector, and the potential “manufacturing renaissance” from the shale gas phenomenon, could fail to materialize if policymakers – that is, President Barack Obama and the US Congress – do not quickly reach an agreement that would substantially reduce the federal deficit.
Additional reporting by Joe Kamalick and Jeremy Pafford
($1 = €0.74)
Follow Ken Fountain (@ICIS_Ken) on Twitter.
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