US export PVC deals fixed at all-time pricing high: sources

US export polyvinyl chloride cargoes have been fixed at prices in a range of $1,900-$1,950/mt FAS Houston after Hurricane Ida's Aug. 29 landfall in Louisiana and the shutdown of the largest US PVC plant in Texas, leaving 59% of North American PVC capacity offline, market sources said Sept. 10.

Those price levels were the highest since S&P Global Platts began assessing the market in 1983.

The previous high was $1,800/mt FAS reached in March after a deep freeze hit the US Gulf Coast in mid-February, forcing weeks-long petrochemical shutdowns that included about 57% of North American PVC capacity.

Export PVC was last assessed Sept. 8 at $1,675/mt FAS, the level where deals for September volumes were done before Ida made landfall.

The high end of the range where volumes have since sold marked a $275 increase from the last assessed level.

However, market sources said a spike had been expected given the amount of PVC capacity offline amid tight supply and low inventories that had not recovered from weeks-long shutdowns after the deep freeze.

About 3.46 million mt/year, or 41%, of the 8.29 million mt/year North American PVC capacity operated by Shintech, Westlake Chemical and Formosa Plastics USA shut down along the Mississippi River ahead of Ida's landfall.

By the end of the week of Aug. 30, Shintech also shut its 1.45 million mt/year PVC plant in Freeport, Texas – the largest in North America – on a lack of feedstock after Olin shut its 835,000 mt/year vinyl chloride monomer plant in Freeport because of equipment failure.

The Texas shutdown pushed the total amount of shut PVC capacity to 59%.

Formosa was wrapping up an August turnaround at its 798,000 mt/year PVC unit in Point Comfort, Texas, at the same time. Including that plant, nearly 69% of North American PVC capacity was offline.

The Louisiana plants were restarting, albeit slowly, awaiting full access to industrial gases, according to sources familiar with the companies' operations. None of the companies responded to requests for comment.

"In Louisiana, nitrogen supply is still under allocation and our restarting process has been under way with careful steps," a producer source said.

"Everyone is in the same situation," another source said.

Shintech's Freeport shutdown came after Olin exhausted all VCM stocks, and was waiting for Olin to complete repairs and resume production, sources familiar with the companies' operations said. Shintech and Olin did not respond to requests for comment.

PVC demand strong

PVC is a construction staple used to make pipes, window frames, vinyl siding and other products. Demand crashed at the height of COVID-19-related shutdowns in April and May 2020. It began rebounding in June on a housing construction boom fueled by consumers seeking more space while working from home and in many cases, overseeing children's educations when schools were shut down.

That construction boom has endured and remains strong.

However, supply tightened in the second half of 2020 when two hurricanes hit western Louisiana in August and October, forcing Westlake Chemical's upstream PVC operations in Lake Charles offline for weeks. Formosa Plastics USA's output also declined when an upstream turnaround took longer than expected, leaving PVC stocks depleted.

Both companies had begun to recover months later, but then the February freeze hit, prompting production shutdowns throughout Texas and elsewhere. Consistently strong housing construction demand hindered efforts to restock inventories after production resumed, and subsequent operational issues and turnarounds kept supply tight, sources said.

PVC operations along the Mississippi River operated by Shintech, Westlake Chemical and Formosa were largely spared from the impacts of the 2020 hurricanes and the freeze, but were in Ida's crosshairs.

Domestic PVC prices have gained 45.5 cents/lb $1,003/mt) since June 2020. Domestic prices were last assessed Sept. 8 at 91.5-93.5 cents/lb ($2,017-$2,061/mt).

Market sources had expected PVC prices to retreat in Q4 2021 if the US Gulf Coast did not get hit with a hurricane. Sources said Sept. 10 that prices were still expected to retreat as production comes back online. However, Ida's impact combined with continued strong demand could keep supply tight and hinder restocking through the rest of the year.

"After people come back running, there may be some more correction," a source said.