US PVC exports stall, despite shale gas cost advantage

Economic growth

SHARE THIS STORY

PVC Jun13.pngYou can lead a horse to water, but you can’t make her drink. That seems to be the critical message from the current state of US PVC export demand. This should be booming, based on the cost advantage provided by shale gas. But reality is different, as the chart based on Global Trade Information Services data shows:

• Net exports (red column) are up just 4% versus 2011 levels (blue)
• The main strength is in sales within NAFTA, up 19%; and the Middle East, up 7%
• China sales are up a mere 2% as its economy changes direction
• Sales to all other markets are lower than in 2011

PVC producers gain a double benefit from shale gas. Not only are their manufacturing costs reduced, but cheap ethane gives major advantage on ethylene cost. In the SuperCycle, this low-cost position would have made exports extraordinarily competitive.

But today’s world is quite different. Access to secure demand, rather than low-cost supply, is the key to success. And on this basis, US producers are in a much more difficult position:

• US housing starts are still 62% below their January 2006 peak. We will never see anything like that level again in our lifetimes, as the blog discussed last month
• Lack of domestic demand means producers have to look to export markets for growth – always a much more risky proposition. NAFTA is growing, but its demand remains relatively small
• Other markets are slowing fast. For example, China’s slowdown has had a major impact on Brazil, whose GDP grew just 0.6% in Q1, the 5th consecutive quarter of decline. And as a result, social unrest is building, with riots on the street over rising bus fares

This places a further question mark over the plans to expand US ethylene production by 10 million tonnes. Companies, and investors, need to ask themselves the critical question – where will all this new capacity be sold? The PVC data is yet another demonstration that SuperCycle thinking – ‘if you build it, they will come’ – is now well out of date.

PREVIOUS POST

US consumer sentiment confirms Boom/Gloom Index weakness

18/06/2013

It is now 4 years since the blog launched its IeC Boom/Gloom Index, as a way of ...

Learn more
NEXT POST

Working women changed Western economy after 1970

20/06/2013

Household consumption is 60% of western GDP. So any economic forecast that simpl...

Learn more
More posts
China’s lockdown makes global debt crisis now almost certain
23/02/2020

Beijing has a population of 21.5 million, but you wouldn’t know it from this BBC video from la...

Read
Financial markets head for (another) train crash as coronavirus starts to impact
17/02/2020

China’s industrial heartland of Hubei (pop 59m) and its capital Wuhan (pop 11m) have now been ...

Read
Coronavirus disruptions make global recession almost certain
11/02/2020

Last month, our Hong Kong-based pH Report colleague, Daniël de Blocq van Scheltinga, warned of the ...

Read
Your A to Z Guide to the Brexit trade negotiations
02/02/2020

A. Article 50 of the Lisbon Treaty set out the rules for leaving the European Union. As with most ne...

Read
Contingency planning is essential in 2020 as “synchronised slowdown” continues
12/01/2020

The IMF has now confirmed that the world economy has moved into the synchronised slowdown that I for...

Read
Boris Johnson will have to disappoint someone in 2020 as the UK finally leaves the EU
15/12/2019

Finally, after three and a half years, the UK has reached “the end of the beginning” wit...

Read
ACS Chemistry & the Economy webinar on Thursday
10/12/2019

Please join me for the next ACS Chemicals & Economy webinar on Thursday, at 2pm Eastern Standard...

Read
What’s next for Brexit and chemicals?
04/12/2019

The UK is about to go to the polls again to try and decide the Brexit issue.  Chemicals will be one...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more