Weak Demand and Ample Inventories Decelerate PVC Prices in US and Europe

Polyvinyl Chloride (PVC) prices continued to follow the plunging trend in the US and European markets at the start of June 2023. The weakening of the global buying enthusiasm in the downstream packaging and construction segments weighed on the PVC prices in the first week of June 2023. Meanwhile, the final PVC prices resulted from several factors, including soaring inventory levels amidst low upstream Ethylene costs and fluctuating crude oil prices in the global market. Moreover, consumer spending in the construction sector across the globe remained sluggish as the global economy was confronting a worrisome outlook. The global economy is being influenced by enduring repercussions such as restrained investment, increasing debt vulnerabilities, and shortages in funding. As a result, there is a looming fear of an extended phase of below-average economic growth.

In the USA, there have been modest improvements in consumer and business sentiment in the construction sector this week. However, the demand is significantly below their long-term averages and is insufficient to impact PVC prices. Meanwhile, the US market's path to a robust and sustainable global economic recovery remains uncertain. Moreover, it is anticipated that the United States economy could experience a mild recession in the second half of 2023 based on the forecasts and discussions held during the Federal meeting in Texas (USA) in May 2023 and further influence consumer spending in the primary PVC-consuming construction sector of the US. The tightening of bank mortgage regulations and the prevailing tight financial conditions are projected to contribute to the ongoing economic crisis.

Similarly, the European PVC prices settled on the downward side in the first week of June 2023, backed by surplus supplies, low downstream demand from the construction and packaging sector of the regional market, and lower feedstock costs. PVC production units have continued to operate at reduced rates to avoid excess stock levels in the previous month.

According to ChemAnalyst, PVC prices will drop in the upcoming weeks of June 2023 owing to the anticipated slump in new orders across the globe amidst deteriorating consumer confidence and rising economic slowdown concerns. Lower feedstock cost settlements and crude oil prices are expected to continue falling. Meanwhile, the lower upstream Ethylene prices are also likely to support the forecasted decline of the PVC prices in the H2 of the Year. Stubbornly high inflation is expected to prompt the interest rate hike cycle in the next month, causing financial conditions to tighten and exacerbating debt vulnerabilities.