Corrected: NPE ’18: US PVC demand shows sharp growth from construction

Correction: In the ICIS article headlined “NPE ’18: US PVC demand shows sharp growth from construction” dated 7 May 2018, please read in the fifth paragraph … first quarter volumes more than doubled the volumes of Q1 2017 … instead of … Q1 2016 … A corrected story follows.

HOUSTON (ICIS)–Times are looking up for US polyvinyl chloride (PVC), heading into this year’s National Plastics Exposition (NPE).

Cruising on consumption growth from rising construction activity, the industry is now seeing some sharp demand pull from recent storms, floods and other weather events have have fuelled reconstruction and remodeling activity.

That contrasts the recent years when construction activity was slow to get back on its feet after the financial and credit crises of 2007.

The result during the first quarter has been sharply higher production of PVC resins for construction applications, according to data from the largest industry group.

Resin sales to make vinyl flooring during the first quarter more than doubled the volumes of Q1 2017, a period already enjoying rising demand from construction activity, according to data from the American Chemistry Council using data compiled by Vault Consulting.

PVC sales to flooring companies is also helped by luxury vinyl flooring, a type of flooring that accurately emulates natural wood or tile at much more affordable prices than the genuine versions and has been enjoying commercial success.

Sales of resins for extruded windows and doors is up by 27%, and sales of resins to make fencing and decking are up by 16%.

Those growing numbers have been  sustained by growing US construction activity, up by 3.6% to $1.3tr in March on annualised and seasonally adjusted figures, according to the US Census Bureau.

Most importantly, residential construction, which consumes the most PVC, is up more than 5% from 2017, according to the Census.

Construction accounts for some 60% or more of US PVC demand, and the rising construction activity had drawn US PVC production up by 3.2% so far this year, including January when freezing weather disrupted several plant operations.

The rising domestic demand is driving US producers to run hard and limiting US export availability.

US exports for 2018 are flat with the first two months of 2017, according to figures from the US International Trade Commision (ITC).

“If we wanted to make more PVC or caustic soda, we couldn’t,” said a representative of a large US PVC producer.

That has also helped to firm domestic prices.

Contract prices are up by about 5 cent/lb ($110/tonne) so far this year, according to the ICIS assessment.

But demand is expected to continue to grow, especially as reconstruction efforts in Texas, Florida and Puerto Rico got fully under way.

The bill to repair those damaged regions – and from wildfires in California that have consumed more than 10,000 structures – is estimated as high as $500bn and higher.

US construction activity flat-lined after the 2007-2008 financial crisis and has been slow to return.

US PVC producers have longed for the boom times prior to the bust when construction accounted for 8.7% of the US economy.

But the pace that built the bubble is unlikely to continue, though estimates are that construction levels will approach those of 2006 by about 2021.

“I don’t want to be too optimistic,” said an executive at another US PVC producer. “But I think the next two or three years are going be really good.”

Major US PVC  producers include Occidental Chemical, Westlake Chemical, Shintech and Formosa Plastics.

Sponsored by the Plastics Industry Association (PLASTICS), NPE2018: The Plastics Show takes place on 7-11 May in Orlando, Florida.

Focus article by Bill Bowen