Chemical profile: US PVC

15 November 2013 10:00  [Source: ICB]

Polyvinyl chloride (PVC), is the third-most widely produced plastic, after polyethylene and polypropylene. It is characterized as either rigid or flexible resin. PVC is used most widely in construction and packaging. It can be made softer and more flexible by the addition of plasticizers. It is also used in clothing and upholstery, electrical cable insulation, inflatable products and as a rubber replacement.

US PVC demand remains relatively weak from the key downstream construction sector. Market participants expected 2013 to be more robust, but have been disappointed with the muted pick up in homebuilding.

“I don’t know whether it’s the speed of the housing or there’s a delay factor, but that type of demand realisation did not really play out this year,” Axiall CEO Paul Carrico said in an investor earnings call.

Carrico said it seems that the market is on track for continued growth, but the speed of that growth is uncertain. “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.”

US PVC producers have benefited from cheaper ethylene, made using competitively priced ethane from shale, and have clearly been relying on exports. But US PVC export growth has slowed in the face of global competition.

“It seems that a combination of weak global economic growth, plus the arrival of new capacity in other regions, is severely limiting US producers’ scope for further volume gains,” ICIS blogger Paul Hodges, chairman of consultants International eChem, said.

US PVC producers have struggled through 2013 to implement price increases. At various points during the year, they have cited growing demand, tightness in supply and feedstock costs for proposed increases.

But after achieving increases earlier in the year, producers have more recently fallen short in their attempts. Producers have announced price hike initiatives each month, but contract prices have held steady for at least eight consecutive months.

Export prices increased midyear, but have since fallen by more than $150/tonne and many market participants do not think the market has seen the bottom yet.

Although a number of production processes are used to make PVC, depending on the end application, polymerization is normally done at with vinyl chloride monomer (VCM) feedstock in a liquid state.

Suspension polymerization is the most common PVC process, accounting for approximately 89% of vinyl resin production in North America. There is also emulsion polymerization and mass polymerization.

Another process was developed by Belgium-based Solvay called the Vinyloop PVC recycling process, which was used at a 10,000 tonne/year demonstration plant brought onstream at Ferrara, Italy, in early 2002.

Several in the vinyls industry feel the rebound in PVC and other vinyl derivatives is imminent for the US.

Dick Doyle, CEO and president of the trade group The Vinyl Institute, said that after four years of decline through 2009, US housing starts increased modestly in 2010 and 2011 and then accelerated in 2012.

“Vinyl resin production and sales increased for the third straight year in 2012,” Doyle noted, adding that US production of resins was up 6.1% to 15.2bn lb (6.89m tonnes) that year.

“The resurging housing market in 2012 drove increased vinyl sales to related markets,” he said, including windows and doors, rigid pipe and tubing, siding and accessories and fencing and decking.

“So, while we would hope to see a more robust building and construction recovery, we continue to see modest growth and pockets of exceptional regional growth,” Doyle said. “Vinyl products are positioned extremely well to benefit as the building and construction markets recover.”

Meanwhile, research firm Research and Markets is predicting the global PVC market to reach around 72.9m tons by 2016, with growth rate of 11.4%. Asia is the largest volume market with a market share of just under 47%, while The Americas and Europe account for more than 40% of the global market share.

Among the PVC material used, Extruded Film & Sheet appears to be the fastest growing market with a CAGR of 14.1%.

Extruded Windows & Doors and Siding are expected to grow with a CAGR of 12.6% and 11.4%, respectively. Construction represents the fastest growing market for PVC applications to forecast at a CAGR of 
12.1% during the analysis period 2011-2016, respectively.

Author: Heather Doyle

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