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OxyChem sees continued strong PVC, caustic soda demand: CFO

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OxyChem sees continued strong PVC, caustic soda demand: CFO

亮点

Supply constraints have helped boost PVC, caustic soda prices

Company expects 'record year' for chemical segment

Occidental Petroleum sees continued strong demand for construction staple polyvinyl chloride and caustic soda through the rest of 2021, driven largely by tight supply, homebuilding growth and continued global economic recovery from COVID-19 fallout, CFO Robert Peterson said Aug. 4.

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Peterson said the company sees domestic PVC demand up 16% from Q2 2020, and up 13% from pre-pandemic 2019, he said during the company's Q2 2021 earnings call.

"And so strong demand is also attributed to really low levels of inventory and supply chain, combined with the construction sector, which you're seeing, and obviously, in a lot of their construction materials," he said.

Occidental reported a $97 million loss for the quarter, up from an $8.35 billion loss in Q2 2020 at the height of COVID-19 shutdowns. OxyChem, the company's chemical segment, reported a $312 million profit, nearly triple $108 million a year ago.

"We expect that 2021 will be a record year for OxyChem," he said.

Peterson noted that US housing starts have been strong, fueled in part by low mortgage rates and in part by consumers seeking more space or expanding their existing homes during elongated stretches of working from home amid COVID-19.

That construction boom has fed demand for PVC, which is 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 to reach 89.5-91.5 cents/lb ($1,973-$2,017/mt), an all-time high since S&P Global Platts began assessing the market in 2001.

At the same time, PVC supply has been constrained by two hurricanes in 2020, a deep freeze in mid-February that forced weeks-long petrochemical plant shutdowns, and operational issues. The US normally exports more than 30% of about 8.2 million mt/year in US PVC capacity, but outflows have declined sharply amid the domestic pull for less overall volume availability.

Peterson said OxyChem sees US PVC exports down 33%.

Caustic soda demand seen growing

Caustic soda prices have begun recovering from sluggish demand in 2019 and 2020, Peterson said.

Chlorine is the first link in the PVC production chain and caustic soda, a key feedstock for alumina and pulp and paper industries, is a byproduct of chlorine production.

Chlor-alkali production has faced similar setbacks on extreme weather and operational issues, keeping rates lower than the typical 90% range during warmer months. That means less PVC and caustic soda availability when demand for both is seen robust, he said.

Caustic soda demand was seen continuing to grow alongside economic recovery and growth, he said. More participation in sports events, concerts and travel, and returns to offices, means more demand for paper products – bulk delivery boxes, printing paper, cups and napkins.

"As economies open up and eventually travel restrictions ease globally, we should see additional demand in underlying sectors," Peterson said.