Plastics Industry Perspective
1st Quarter 2014
PVC Prices Up on Tight Supply
PVC resin, which has heavy
use in extruded windows and
doors as well as rigid pipe and
tubing, experienced three consecutive months of 3 cent price
increases in each of the first
three months of 2014.
On the supply side, tight
supply of the feedstock ethylene
coupled with production issues
due to weather have caused
production challenges for PVC
manufacturers like OxyVinyls
and Westlake. Additionally, a
fire at an Axiall facility in Lake
Charles, LA, which produces
the feedstock VCM, has added
to supply challenges.
Price increases stuck even
though domestic use of PVC
was down in the first quarter of
2014 compared to the first
quarter of 2013. The supply of
PVC in the market is tight and
the manufacturers of PVC
appear to have done a good
job of controlling volumes,
which has prevented downstream users of PVC from
building inventory. The decreased demand for PVC in
the first quarter is believed to
be weather related. Domestic new housing starts were up
approximately 18 percent in
2013 and are expected to grow
to approximately 1.1 million new
starts in 2014 (up from 920
thousand in 2013). This level of
new starts would be closer to
historical levels and the first
time over 1 million in seven
years. Housing drives PVC
demand; with supply of PVC
currently tight and demand anticipated to increase, buyers of
PVC likely will not see prices
come down, at least in the short
term.
EXPORTS
The U.S. is the largest ex-
porter of PVC in the world and exported 2.9 million tons in
2013. Exports of PVC fell 3% in
2013 which was the first decline
since 2009. The decline is
believed to be driven by in-
creased domestic demand via
increases in housing. A factor
in the decline was also a 68%
increase in PVC exports out of
China, which exported 660
thousand tons in 2013. U.S.
exports of PVC are expected to
be important in the future as a
way to utilize excess capacity
from the numerous domestic
investments in ethylene that will
take advantage of low cost
shale gas.
Kevin Duffy is a Senior Inventory appraiser who specializes in the plastics industry. He
has appraised numerous plastics-related companies in North America that are involved
in distributing, compounding and manufacturing resins, films, sheets, and molds. Kevin
received his B.A. in finance from Illinois State University, and passed the CPA exam in
Illinois. Kevin has diverse business experience in
accounting, banking, manufacturing,
distribution, and retail.