AFPM ’19: US PVC sees mixed signs for 2019

HOUSTON (ICIS)–US polyvinyl chloride (PVC) is facing new tests in the market as global demand appears hesitant and the spring surge in domestic demand seems delayed by severe winter conditions and flooding in parts of the country.

Worse, prices in Asia took a nosedive on 19 March when Formosa Plastics in Taiwan announced its April export offers at a discount of $50/tonne to China and $60/tonne lower for India.

That is the grim market scenario ahead of the International Petrochemical Conference in San Antonio.

Slowing exports and a halting of the usual demand cycle in the US has cast a cloud over the US market. PVC demand is tied to construction activity and is often a leading indicator of a slowing economy.

That is what market participants don’t want. Slowing economic growth is going to hurt PVC demand.

The year started with US domestic sales shown flat for 2018 compared with 2017, a sign that US construction demand was not as firm as expected.

Price trends have been softer as US producers expected the usual demand surge in March, but have yet to see signs of it.

Efforts to lift spot export prices have been unsuccessful to a cautious buyer market.

Domestic sales in the first two months of 2019 are down 2.5% from the same period last year in the US and Canada, according to figures from the American Chemistry Council.

In 2018, US and Canada exports were up 3% from 2017, and are up 7.5% for the first two months of the year, compared to weak volumes in February 2018.

The headwinds have prompted some worry against the backdrop of trade tensions between the US and China and other geopolitical noise.

“You would expect that this time of year would see a demand pick-up,” said a representative of a US producer, bemoaning the soft activity in February.

However, Albert Chao, president and CEO of Westlake Chemical, told analysts in mid-February that he is optimistic.

“We believe that the global supply-demand balance will return,” he said.

Chlorine production in February was pretty strong with an 88% effective plant utilisation rate for the month and a 2% uptick from January output, according to new figures from the Chlorine Institute.

A rise of chlorine production as PVC demand stalls may mean excess upstream feedstock ethylene dichloride (EDC). That could spur some spot sales for the chlorine derivative.

Vinyl chloride monomer (VCM) has been silent in recent months on little trade activity outside of established contract routes.

Major US producers of caustic soda include Olin, Occidental Chemical, Westlake Chemical, Shintech and Formosa Plastics.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 24-26 March in San Antonio, Texas.

Focus article by Bill Bowen