July US housing starts fall 7% from June: Census Bureau

July US housing starts were down 7% from June, but were 2.5% higher on the year, according to data released Aug. 18 by the US Census Bureau and the US Department of Housing and Urban Development.

July housing starts reached 1.534 million units, down from 1.65 million units in June, but above 1.497 million units in July 2020, the data showed. Authorized building permits reached 1.635 million units in July, up 2.6% from June and 6% above July 2020 levels.

The data is a top indicator of domestic demand for polyvinyl chloride, a construction staple used to make pipes, window frames, vinyl siding and other products.

Domestic PVC prices have gained 43.5 cents/lb ($959/mt) since June 2020 amid a US housing construction boom. Domestic prices were last assessed Aug. 11 at 89.50-91.50 cents/lb ($1,973-$2,017/mt), an all-time high since S&P Global Platts began assessing the market in 2001. Producers have been heard seeking additional price increases of 2-4 cents/lb for August.

Tight supply has also boosted prices. US PVC supply has been tight throughout 2021.

Inventories entered 2021 lower than normal after two hurricanes hit Louisiana in August and October 2020, and then a deep freeze that hit the US Gulf Coast in mid-February forced weeks-long shutdowns, which further eroded stocks. Subsequent operational issues that affected upstream operations also have limited output.

"The whole US is very, very tight," a market source said.

Domestic PVC demand siphoning export supply availability

This domestic demand has driven sales of limited material, siphoning export volume availability.

US PVC exports in the first half of 2021 of 1.05 million mt were 17% lower than the volume shipped out in the first six months of 2020, according to US International Trade Commission data. The 2020 data includes April and May 2020, when PVC demand cratered amid the height of COVID-19 shutdowns.

Export PVC was last assessed Aug. 11 at $1,600/mt FAS Houston, having rebounded from $1,450/mt FAS in mid-July when supply tightened on operational issues. Prices reached $1,800/mt FAS in late March amid freeze-related shutdowns, an all-time high since Platts began assessing the market in 1983.

The US housing construction boom emerged in June 2020 as shutdowns eased, and consumers sought more space to work from home long term, and in many cases to oversee children's education amid closed schools.

Since then, housing construction demand has remained strong with some dips seen along the way, most notably in February on the freeze. The July 2021 dip may signal a possible peak, market sources said.

The National Association of Home Builders/Wells Fargo Housing Market Index released Aug. 17 showed higher construction costs and supply shortages, along with rising home prices, have pushed homebuilder confidence down five points to 75, its lowest level since July 2020.

NAHB Chairman Chuck Fowke said in a statement that buyer traffic had fallen to its lowest reading since July 2020 as some prospective buyers faced high home costs.

Those costs have risen sharply on more costly inputs, including PVC, as well as polypropylene for appliances and carpet. Lumber prices, however, have fallen nearly 72% from a high of more than $1,733 per thousand board feet to nearly $471 on the Nasdaq Aug. 16.