Mexico-based PVC producer Orbia has suspended plans to construct a PVC plant in the US Gulf coast as weak global demand creates an over-supplied market, the company said today.
The proposed plant would produce roughly 1mn t/yr. Orbia had previously delayed the timing of the expansion as the company worked to better assess market dynamics. As part of that effort, Orbia recently sent a team to China, which it sees as a major factor in its outlook for the global vinyl industry.
Orbia concluded that weakness in China's real estate and construction sector, combined with the country's current supply excess, is resulting in roughly 2mn metric tonnes/yr being available for export from China. The company expects this dynamic to remain for a few years, resulting in the indefinite delay of the proposed plant.
"After we complete the current phase of engineering, we will pause PVC capacity expansion investments until we see the markets supporting strong investment economics," Orbia chief executive Sameer Bharadwaj said Thursday on an earnings conference call.
Orbia is moving forward with other investments, including its joint venture polyvinylidene fluoride (PVDF) plant with Syensqo, a company that was spun off from Solvay in December.
Orbia said the increase in export availability from China was weakening global PVC prices at the same time as global economic slowdowns and higher interest rates are dampening demand in key markets. US PVC export prices have risen by about $80/t to $750/t fas Houston over the last month, but Orbia said prices would need to be closer to $1,000t to justify the new plant. US PVC prices have struggled to rise above $850/t since March 2023.
Orbia reported revenue for its polymer solutions segment, which includes its general purpose and specialty-PVC resins as well as chlor-alkali, of $577mn, down by 15pc from the third quarter and down by 21pc from a year earlier.
Revenue fell partly because of reduced sales volumes, as a result of planned maintenance and a delay with the company's ethylene joint venture plant, the company said. Lower prices for specialty PVC and caustic soda and a weaker export market also were contributing factors.
US emulsion-grade (E-PVC) resin, also referred to as paste-PVC has fallen in price in recent months due to increased imports from Europe. Imported paste-PVC pricing was assessed at 65-75¢/lb cfr US east coast last week, down from a range of 65-80¢/lb in January.
The company's building and infrastructure segment, which includes pipe and fittings products, reported revenues at $595mn, down by 14pc from the third quarter and down by 10pc from the same quarter of the previous year.
Total company revenue fell to $1.77bn in the fourth quarter, down from $2bn in the third quarter and $2.1bn in the fourth quarter of 2022.
Despite the weak performance of its chemicals business, and some of the issues present in the current market, Orbia expressed confidence that fundamentals were present for demand growth to eclipse current global supply in five years or so.
Expectations for 2024 were more tempered.
"We expect marginal improvement, driven by a recovery in PVC volumes, and a slight improvement in prices during the year," Bharadwaj said regarding the company's polymers solutions business. He added that these improvements would be partially offset by weaker caustic soda prices.
