US PVC Prices tend to remain on Surge Due to Tighter Global Supply in June 2024

The PVC (Polyvinyl Chloride) price has risen significantly in the North American market in recent weeks due to insufficient inventories and high selling costs in the face of slowed-down production rates. Moreover, the approaching Hurricane season has brought the state’s industrial production for PVC to a standstill, although the production rates in the upstream market restarted in mid-May. Moreover, the upstream Ethylene prices surged this week. The PVC prices in the US market were significantly driven up due to high input costs, and the sellers were compelled to pass the cost burden to the existing consumers in the PVC market for the time being.

In the week ending June 7, 2024, the US PVC export prices surged by approximately USD 50/MT on average, driven by tighter global supply and freight challenges that outweigh increasing domestic production. Meanwhile, Occidental Petroleum Corporation in Texas with a total production capacity of 142083 TPM underwent Force Majeure for 11 days at the termination of May 2024 further contributing to the tightness in the PVC supply side in the face of severe thunderstorms.

Some US producers have ramped up operating rates after months of maintenance and unplanned outages, but this was insufficient to ease global supply constraints as domestic sales volumes have also risen, tightening inventories.

Meanwhile, Chinese PVC producers have reduced exports to Africa, India, and South Asia. Market participants note that rising freight rates from Asia have made Chinese PVC exports less competitive compared to the US and European supply, allowing US PVC producers to spike previously competitive regions at higher prices.

Furthermore, the US export prices have also benefited from the force majeure declaration and shutdown at Orbia's Altamira PVC plant in Tamaulipas, Mexico due to water shortages, with no public announcement on when operations will resume. The impact of the shutdown became evident as traders and buyers in Latin America organized June shipments.

The Orbia’s supply from its Colombian operations to Central America remains uncertain, however, US exporters anticipate increasing tightness in the Latin American PVC market. The lack of affordable resin from Asia due to high freight rates further limits alternative supply options.

As per the ChemAnalyst, the PVC prices are likely to increase in the American market due to the tight supply side as the US producers are uncertain how long the elevated PVC prices will persist. Some buyers are delaying spot purchases, expecting prices to drop as summer progresses. However, the seasonal increase in the downstream construction demand may also be likely to contribute further to the inclination of the US PVC price trend.