US polyvinyl chloride (PVC) market participants expect some domestic demand growth in 2025, but recent expansions could limit price increases in both the domestic and export markets.
Most producers are optimistic PVC demand will grow at a strong rate in 2025, with some expecting growth above 5pc. But producers also caution that greater volume sales may not translate into higher prices because of additional capacity brought on line in the second half of 2024.
Formosa added 130,000 metric tonnes (t) of PVC capacity to its Baton Rouge, Louisiana, plant in the third quarter, and Shintech added 380,000t/yr of PVC capacity to its Plaquemine, Louisiana, plant in the fourth quarter.
Producers' concerns that higher sales volume would not translate into higher prices have proven true so far. Domestic PVC sales have grown as much as 8pc in the year through November, according to producers, but PVC contract prices in November were unchanged from January at 57.5¢/lb after some fluctuations during the year.
Prices fell by 2¢/lb in the months following Formosa's expansion. Contracts for December, which will represent the month following Shintech's expansion, have not yet settled.
Buyers have more muted expectations than producers for demand in 2025, further adding to the modest price outlook for the coming year. This is partly because many buyers believe interest rates that recently began to fall will take time to stimulate housing construction, potentially delaying a rise in PVC demand until late 2025 or even 2026. Lower interest rates can reduce homebuilders' borrowing costs and ease mortgage rates for prospective homebuyers.
The cautious outlook was already pervasive among PVC buyers and converters before the US Federal Reserve in December reduced its forecast for 2025 interest rate cuts to half a percentage point, down from a full point in the September projections.
Reliance on exports
US producers may need to rely on exports to absorb the new capacity, a trend that has kept export prices low since August.
US PVC export spot prices were at $700/t fas on average in late September after Formosa ramped up its capacity expansion, compared to an average of $750/t fas a year earlier.
After Shintech's expansion, export prices fell to $673/t fas on average by late-December, compared to $695/t fas on average during the same time in 2023. While spot export prices initially had a floor of $670/t fas after both expansions, the global environment has become even more competitive at year-end with some overseas producers struggling to move volume, according to traders.
A greater reliance on exports at a time when several countries recently implemented anti-dumping duties on US material could make for a difficult market in 2025, with pricing needing to come down to start the year if there is too much volume on hand, traders said.
India recently announced preliminary anti-dumping duties on US PVC from 80-150pc, with duties exceeding $300/t for some US producers. Brazil in October raised import taxes on PVC from 12.6pc to 20pc.
The European Commission last month confirmed duties on US-origin PVC between 58-71.2pc, and the UK is considering duties from 38.4-56pc.
The Indian duties in particular could pose a challenge to US exporters because US producers and traders had become reliant on Indian customers as an outlet for US supply. India is one of the few countries for US exports with steady demand growth. Should US exporters lose market share in India, there are no immediate alternatives to offset that loss.
