Mexico-based PVC producer Orbia expressed caution on both its market expectations for the rest of 2023 and start of 2024 as well as its plans to build a new plant on the US Gulf coast because of a struggling global market.
Regarding the timing and scope of previously proposed construction of a new PVC plant in the US Gulf, Orbia said it was still evaluating market conditions, which include weakness in global PVC demand and prices.
Orbia plans to announce more concrete updates about project plans during next year's strategy session with investors, but the company said no final financial investment decisions have been made yet.
Weakness in the polymers, connectivity and infrastructure products sectors drove an outlook for a mid-teens percentage decline in revenue for 2023. Additionally, planned maintenance in the fourth quarter was lowering revenue expectations on lost output.
Poor Chinese demand in the housing sector has removed a key consumer of PVC and has been driving Chinese producers to flood foreign markets with resin at cheaper prices, according to the company.
Orbia said the additional Chinese PVC in the midst of weak global demand was resulting in lower PVC prices. The latest Argus assessment puts the US export price range at $700-$720/metric tonne fas Houston, nearly $100/t lower than in the previous month.
Orbia said it had researchers in China to better understand the market there and help it decide on expansion in the US.
Additionally, the company said higher interest rates weighing down housing markets, uncertain economies in the Americas and Europe and higher global energy costs made it difficult to say when exactly market fundamentals would improve and revive PVC demand in other parts of the world. In the short term, it said expectations for PVC are bearish.
"Even though we've had a weak quarter, and we expect some weakness going forward, the long-term fundamentals remain intact," chief executive Sameer Bharadwaj said.
Revenues in the third quarter for the company's polymer solutions sector, which includes general purpose and specialty PVC resins as well as chlor-alkali, were $677mn, down by 19pc compared with $837mn in the third quarter of 2022.
Revenues in the building and infrastructure sector, which includes pipe and fittings products, were $694mn, down by 1pc.
Company-wide revenues fell by 14pc to $2bn in the third quarter.
