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US PVC producers seek fresh round of domestic price increases for January

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US PVC producers seek fresh round of domestic price increases for January

Highlights

Strong domestic demand driving push for higher prices

Upstream chlor-alkali rates inched up in November

Houston — OxyChem and Westlake Chemical have both announced 4 cents/lb price increases for construction staple polyvinyl chloride in January, according to customer letters seen by S&P Global Platts and sources familiar with company operations.

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The announcements come after Formosa Plastics USA on Dec. 9 announced a 4 cents/lb increase for January. Shintech, the fourth US PVC producer, had already announced a 3 cents/lb increase for January.

The 4 cents/lb announcements are in addition to 3 cents/lb price increases pending for December by Formosa and Westlake and for November by OxyChem, the chemical division of Occidental Petroleum.

The companies did not respond to requests for comment.

The domestic market did not accept the 3 cents/lb increase for November, but the others remain pending, market sources said Dec. 23.

US domestic and export prices for PVC have both reached all-time highs amid tight supply and strong demand. Domestic prices were last assessed Dec. 16 at 67-69 cents/lb delivered ($1,477-$1,521/mt), the highest since S&P Global Platts began assessing the market in 2001. Export prices were assessed Dec. 16 at $1,445-$1,455/mt FAS Houston, the highest since Platts began assessing that market in 1983.

The additional price increases, if accepted, would push domestic prices up another 7 cents/lb to 74-76 cents/lb ($1,631-$1,675/mt), a fresh all-time high. It typically takes weeks for increases to be negotiated and accepted.

US HOUSING DATA ILLUSTRATES STRONG DOMESTIC PVC DEMAND

The latest US housing starts data illustrates continued strong demand, which has bucked the typical seasonal lull seen in colder winter months.

November housing starts rose 1.2% to 1.547 million units from October levels, and were 12.8% higher than1.371 million units in November 2019, according to the data released Dec. 17.

Market sources said a continued push for new dwellings amid the coronavirus pandemic has fueled PVC demand, particularly for single-family housing with separate ventilation systems and more space for consumers working from home.

However, tight supply has supported higher prices. Producers have maintained reduced upstream chlor-alkali rates since April, when rates plunged to 68% from 90% in March amid the height of pandemic-related shutdowns and economic shocks.

Rates had since held in the low to mid-70s percent range until November, when they rose to 80%, according to the latest industry statistics. Rates remained lower year on year, as November 2019 rates were 85%, those statistics showed.

Market sources said high PVC prices may have prompted rates to inch up in November, but rates are not expected to rise significantly given continued weak caustic soda demand.

Chlorine produced in the chlor-alkali process is the first link in the PVC production chain. Caustic soda, a key feedstock for alumina and pulp and paper industries, is a byproduct of chlorine production.

Producers had been reluctant to raise chlor-alkali rates beyond the mid-70s percent range to keep caustic soda inventories in check, but record-high PVC prices may have softened that outlook, sources said.