US December housing starts up on month, year: Census Bureau

Houston — US December housing starts and building permit authorizations rose month on month and year on year, according to Census Bureau data Jan. 21, illustrating continued strong demand for construction staple polyvinyl chloride, for which prices remain at all-time highs.

December US housing starts reached 1.669 million units, the highest monthly count in 2020, according to the data. December's level was up 5.8% from 1.578 million units in November and up 5.2% from 1.587 million units in December 2019.

Single-family housing starts in December reached 1.338 million units, up 12% from 1.195 million units in November, the data showed.

Plans for more new housing also grew on the month and year, the data showed. Building permits authorized for privately-owned housing units reached 1.709 million units, up 4.5% from 1.635 million units in November and 17.3% higher than 1.457 million units in December 2019.

The coronavirus pandemic has helped fuel that demand amid a consumer push for standalone housing with work-from-home space, bucking a seasonal demand decline typically seen in colder months. That push, in turn, has sustained strong demand for PVC, used to make pipes, window frames, vinyl siding and other products.

Prices up on demand, tight supply

Domestic PVC prices reached 67-69 cents/lb delivered ($1,477-$1,521/mt) Nov. 25 and have held there since — an all-time high since S&P Global Platts began assessing that market in January 2001. Domestic prices fell 8 cents/lb ($176/mt) in April and May to 46-48 cents/lb ($1,014-$1,058/mt) at the height of pandemic-related shutdowns, but have since surged 21 cents/lb ($463/mt) to the current level.

US PVC supply also has been tight for months amid reduced upstream US chlor-alkali rates, operational issues, and hurricanes in August and October that further siphoned output for weeks, supporting higher prices.

US chlor-alkali rates plunged to 68% in April from 90% in March, and remained in the low to mid 70% range from May through October.

However, rates rose to 83% in November, and the latest industry statistics showed rates reached 84% in December, indicating output has inched closer to year-ago levels. Rates in December 2019 reached 86%.

Producers had been reluctant to significantly raise chlor-alkali rates amid weak demand for caustic soda, a key feedstock for alumina and pulp and paper industries, and a byproduct of the production of chlorine, the first link in the PVC chain.

The increase in chlor-alkali rates in November and December could in part stem from the lure of record-high PVC prices and lead to more supply availability, market sources said.

However, overall supply was expected to remain tight in Q1 2021 amid planned January work at Westlake's 861,825 mt/year PVC plant in Plaquemine, Louisiana, and upcoming March turnarounds and Shintech and OxyChem's 1.4 million mt/year and 1 million mt/year PVC units in Freeport, Texas, and Pasadena, Texas, respectively, according to sources familiar with company operations.

The companies did not respond to requests for comment.

The domestic market is considering a cumulative 7 cents/lb ($154/mt) in price increases for January and February, but market sources said some pushback has emerged after wide acceptance of increases in 2020.

"Domestic will be a hard sell," a source said.

Export PVC prices in mid-December reached an all-time high of $1,450/mt FAS Houston as well and have held at that level, but sources do not expect further upward momentum. Global supply has been tight, but European supply was seen more available in February, while Asian demand was waning ahead of the Lunar New Year holidays, sources said.