ICIS WEBINAR: Rise in PVC demand to address chlor-alkali imbalance

HOUSTON (ICIS)–A recent uptick in demand for polyvinyl chloride (PVC) amid reopening economies is helping to slowly rebalance what had become an imbalanced chlor-alkali market, said ICIS Senior Markets Editor Bill Bowen.

He made his comments at a webinar, part of a series hosted by ICIS.

After steep cuts in PVC contract prices in April and May, demand for the resin has rebounded, particularly in the export markets.

Caustic soda and chlorine are created as co-products by chlor-alkali plants. Because chlorine is difficult to store, chlor-alkali plants run their plants based on demand for chlorine.

As a result, when chlorine demand is high, chlor-alkali plants will raise production rates, potentially flooding the market with caustic soda.

When chlorine demand is low, the plants will lower production rates, potentially restricting supplies of caustic soda.

PRODUCTION CUTS

The current imbalance, caused by relatively sustained demand for caustic soda and falling demand for chlorine and PVC, had left chlor-alkali producers with an excess of chlorine on their hands, resulting in production cuts.

Chlorine is closely tied to construction activity, which was severely hurt by the coronavirus shutdowns.

Chlorine is used in the manufacture of paints and epoxies; PVC is used to make pipes, tubing, electrical insulation and other construction materials.

PVC is also used in the automobiles, another hard-hit end-use sector.

Demand for chlorine and PVC started slowing down in March and April. Weakened demand for PVC prompted production cuts, reducing the output for chlorine and caustic soda and causing a tightening in US caustic soda supply.

CAUSTIC SODA

Demand for caustic soda was not as immediately or heavily impacted by the coronavirus.

It is used in industrial activities such as water treatment and pulp and paper and chemical manufacturing. Caustic soda is also used to make soaps, detergents, soft tissues, absorbent materials and cleaning supplies.

Demand for caustic soda began weakening in other sectors, around May, as refineries and pulp and paper manufacturing facilities lowered production. Caustic soda is also used in alumina refining, which slowed due to a slowdown in automobile and aircraft manufacturing.

RECOVERY

Construction is resuming in the US, and auto manufacturers are reopening their plants, but the increase in demand for PVC is mainly due to exports, chiefly to Asia and China.

China is approximately two months ahead of the US in the recovery cycle.

Bowen said that demand recovery will be slow and will not reach pre-coronavirus levels until the end of Q3 or perhaps next year.