Since 2021, global demand for polyvinyl chloride (PVC) has seen a sharp rise not seen since the 2008 global financial crisis. But by mid-2022, PVC demand is cooling rapidly and prices are falling because of rising interest rates and the highest inflation in decades.
In 2020, demand for PVC resin, which is used to make pipes, door and window profiles, vinyl siding and other products, fell sharply in the early months of the global COVID-19 outbreak as construction activity slowed. S&P Global Commodity Insights data shows that in the six weeks to the end of April 2020, the price of PVC exported from the United States plunged by 39%, while the price of PVC in Asia and Turkey also fell by 25% to 31%. PVC prices and demand rebounded quickly by mid-2020, with strong growth momentum through early 2022. Market participants said that from the demand side, remote home office and children’s home online education have promoted the growth of housing PVC demand. On the supply side, high freight rates for Asian exports have made Asian PVC uncompetitive as it enters other regions for most of 2021, the United States has reduced supply due to extreme weather events, several production units in Europe have been disrupted, and energy prices have persisted. Rising, thereby greatly raising the cost of production, making the global PVC prices rise rapidly.
Market participants have predicted that PVC prices will return to normal in early 2022, with global PVC prices slowly falling back. However, factors such as the escalation of the Russian-Ukrainian conflict and the epidemic in Asia have had a profound impact on PVC demand, and global inflation has triggered higher prices for basic necessities such as food and energy, as well as rising global interest rates and fears of economic recession. After a period of price increases, PVC market demand began to be curbed.
In the housing market, according to data from Freddie Mac, the average U.S. 30-year fixed mortgage rate reached 6.29% in September, up from 2.88% in September 2021 and 3.22% in January 2022. Mortgage rates have more than doubled now, doubling monthly payments and weakening homebuyers’ loan affordability, Stuart Miller, executive chairman of Lennar, the second-largest U.S. homebuilder, said in September. The ability to “greatly affect” the US real estate market is bound to curb demand for PVC in construction at the same time.
In terms of price, the PVC markets in Asia, the United States and Europe are basically separated from each other. As freight rates plummeted and Asian PVC regained its global competitiveness, Asian producers began to cut prices to compete for market share. U.S. producers also responded with price cuts, prompting U.S. and Asian PVC prices to fall first. In Europe, the price of PVC products in Europe is higher than before because of continued high energy prices and potential energy shortages, especially because of the potential shortage of electricity, which has led to a decline in PVC production from the chlor-alkali industry. However, falling US PVC prices may open an arbitrage window to Europe, and European PVC prices will not get out of hand. In addition, European PVC demand has also declined due to the economic recession and logistics congestion.
Post time: Oct-26-2022