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OxyVinyls announces third September domestic PVC price increase

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OxyVinyls announces third September domestic PVC price increase

Highlights

Announcement comes amid strong demand, tight supply

Domestic prices already more than recover April-May losses

Houston — OxyVinyls, the chemical division of Occidental Petroleum, has announced a 4 cents/lb price increase for domestic polyvinyl chloride for September, in addition to two previous September price increases for a combined 8 cents/lb, according to a customer letter obtained by S&P Global Platts.

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The letter, dated Sept. 28, said the increase was effective "immediately or as contract terms permit," as is typical for such announcements.

Market sources said it was unusual, however, to see a price increase announcement for a certain month issued in the last few days of that month.

"There's only two days left" in September, a source said on Sept. 29.

Occidental did not immediately respond to a request for comment.

All four US PVC producers had previously announced 3 cents/lb and 5 cents/lb September price increases for domestic PVC, including two that declared force majeure on the resin in August.

As of Sept. 29, OxyVinyls was the sole producer that announced an additional 4 cents/lb increase.

Domestic prices up

Both domestic and export PVC prices have more than recovered from April lows, when demand cratered amid widespread coronavirus-related shutdowns and resulting economic shocks.

PVC is a construction staple used to make pipes, window frames, vinyl siding and other products. Its fortunes depend heavily on economic strength and gross domestic product growth, both of which fuel construction activity.

Domestic PVC prices fell 8 cents/lb in April and May, when buyers canceled orders amid uncertainty about whether they could resell the powder amid surging unemployment and reduced construction activity. Prices assessed at 54-56 cents/lb ($1,190-$1,234/mt) on April 8 fell to 46-48 cents/lb ($1,014-$1,058/mt) by June 10, Platts data showed.

However, all four producers announced 3 cents/lb price increases for June, July and August, as demand rebounded strongly after shutdowns eased and supply remained tight from turnarounds and reduced rates. All were accepted, and prices rose to 55-57 cents/lb ($1,212-$1,256/mt), reflecting those hikes. Prices were last assessed at that level Sept. 23.

Two PVC producers, Formosa Plastics USA and Westlake Chemical, declared force majeure on US PVC on Aug. 14 and Aug. 31, respectively. Formosa's FM stemmed from an upstream chlor-alkali turnaround that lasted several weeks longer than expected, leaving downstream intermediates depleted. Westlake's FM came after Hurricane Laura's Aug. 27 landfall that left the company's Lake Charles, Louisiana, complex offline, awaiting restoration of full load industrial power.

Both FMs remained in effect on Sept. 29. Other producers have not been able to cover orders left unfilled amid those FMs, resulting in sharply tight supply.

All four producers then announced the September increases -- first the 3 cents/lb hike, then the additional 5 cent/lb, for a total of 8 cents/lb ($176/mt). OxyVinyls' announcement of an additional 4 cents/lb increase ($88/mt), if accepted, would increase September pricing by a total of 12 cents/lb ($264/mt).

Export prices have reflected the demand surge as well. Prices fell 39% in six weeks to a 12-year low of $520/mt FAS Houston on April 29, and have since more than doubled to $1,050/mt FAS, Platts data showed.

The domestic market was considering the September increases. Market sources said they did not expect the initial 8 cents/lb to be accepted in full, even with the supply squeeze that is expected to last through October, when Shintech conducts a turnaround at its Plaquemine, Louisiana, complex.

By November, market sources expect the supply situation to loosen, though uncertainty lingers if another surge in COVID-19 infections prompts another wave of shutdowns. PVC demand also seasonally wanes in winter months as construction activity slows.