09 August 2013 09:26 [Source: ICB]
For US producers of polyvinyl chloride (PVC) and other vinyl derivatives, 2013 has thus far been a perplexing year.
This was the year the long-hoped-for rebound in the US homebuilding sector would finally take effect after years of virtual drought. Through most of 2013, many measures have shown increasing demand for new housing. Sales of newly built, single-family homes jumped by 8.3% to a seasonally adjusted, annual rate of 497,000 units in June.
The US housing rebound has not led to robust volumes of PVC
US PVC producers struggled through the first half of 2013 to implement price increases. At various points during the year, they have cited growing demand, tightness in supply and feedstock costs for the proposed hikes. But after achieving increases earlier in the year, producers have more recently fallen short in their attempts.
They have also struggled to maintain volumes. In early August, US-based vinyls producer Axiall noted that industry-wide operating rates have been below 90% for most of 2013, atypical during times of economic expansion. That has been driven by only a 2% increase in domestic demand and sluggish export demand.
"This is clearly a different environment than we expected at the beginning of the year and this type of environment may continue for the remainder of the year," CEO Paul Carrico said on Axiall's second quarter conference call.
"I don't know whether it's the speed of the housing [recovery] or there's a delay factor, but that type of demand realisation did not really play out this year," he said. "It's clearly not what most people expected, but I would also say that it should get here sooner or later whenever housing does get a little bit more momentum or houses get to the point where they start using our materials."
One consultant thinks part of the problem for PVC is the types of housing being built following the recession. Whereas single-family homes have long been the industry driver, more recently the multi-family sector has been leading the way, said Fred Peterson of Probe Economics.
At the same time, new US households, perhaps wary of taking on the inflated levels of debt that helped lead to the bust, are looking to purchase smaller homes, Peterson said.
Despite those notes of caution, many in the vinyls industry feel the rebound in PVC and vinyl derivatives is imminent.
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