AFPM ’14: US PVC market dominated by tight supply, rising prices

29 March 2014 21:01 Source:ICIS News

HOUSTON (ICIS)--The US polyvinyl chloride (PVC) market has been dominated by production problems and short supply that drove prices up during the first quarter.

But steps are being taken this week to repair the market’s constrained start to 2014 just as delegates gather at the American Fuel & Petrochemical Manufacturers' (AFPM) annual International Petrochemical Conference (IPC), which convenes in San Antonio this weekend.

Most important is the start-up this week of Axiall’s vinyl chloride monomer (VCM) plant in Lake Charles, Louisiana. The plant suffered a 20 December fire that reduced Axiall’s PVC resin output. VCM is upstream of PVC.

That outage echoed through the market as cold weather caused Westlake to reduce production at its Calvert City, Kentucky, plant. OxyVinyls, a division of Occidental Chemical, issued a sales control as Axiall and Westlake customers scoured the market for alternate suppliers. Its note to customers said that “overall demand for OxyVinyls’ PVC resin is outpacing available supply.”

“Everybody was snug before we started having the outages,” a trader said at the time. “It was tight and now it’s tighter.”

Planned maintenance turnarounds were started in recent days by Westlake at the Calvert City plant and by Shintech at its Freeport production facility.

Those have tightened market supplies and aided producers in achieving price increases for the January and February contracts averaging 6 cents/lb ($132/tonne) between the two months. Most producers have a similar increase before the market for March.

But buyers have taken a tougher stance for the March increase and negotiations are ongoing. Buyers say that costs for ethylene feedstock have gone down and that their margins cannot absorb all of the increases producers are seeking.  

The tight supply has reduced the amount of material available for export just as prices in Asia seem to be falling. In the past two weeks prices in the Asian market have fallen by $30-40/tonne.

US PVC exports were down 23% in January, the most recent figures from the US International Trade Commission revealed in early March.

Sources said this week that the Axiall plant should be at commercial production levels almost immediately and that the Shintech and Westlake turnarounds should be completed by mid-April.

That would put the industry back in balance as the peak season for demand arrives and as Middle Eastern and Asian prices become more competitive with US product.

Market participants said it will likely be May before the US market is back to a comfortable balance.

Major US producers include Axiall, Shintech, Formosa Plastics, OxyVinyls and Westlake Chemical.

By Bill Bowen