US PVC prices rise for first time in 9 months

US contract prices for polyvinyl chloride (PVC) increased in January for the first time in nine months, driven by rising export prices and tightening domestic supplies.

US PVC contract prices increased in January to 65.5¢/lb, up by 1¢/lb from December and the first increase since April 2022 when contracts settled at 96.5¢/lb.

Prices began to tumble last year in July, when contracts fell by 5¢/lb and then continued to fall by 5-6¢/lb each month for rest of the year.

January's modest reversal came as export prices have begun to rise in the new year, domestic supply has tightened somewhat, and US demand has stabilized, albeit at a low level.

Rising export prices was the top justification producers cited in seeking higher contract prices. Export prices out of the US had been falling since the summer alongside domestic prices, reaching a low in early December of $610-700/t fas Houston, down from $1,680-1,730/t in early July. Export prices through January held above $700/t and rose in early February to $830/t-$900/t.

Export prices don't track domestic US prices in a precise and equal manner, but the export market's function as a US PVC spot market allows price trends to influence the domestic price.

Domestic demand has stabilized, albeit at a depressed level. Much of the market now views the November-December window as the bottom of negative demand trends seen in 2022. Many producers are reporting a bounce back in ordering, even as many buyers see a more mixed situation.

One buyer this week said January activity improved by 15pc compared to December, and other buyers have begun restocking for the expected demand uptick that comes with the spring building season. But hesitation in the market remains, and multiple buyers still report high inventories in their systems, a key reason January prices didn't rise more.

Questions remain about the approaching peak building season in the US, as the price declines of 2022 were driven largely by a weakening US housing market. Home sales, home construction, and private construction spending all deteriorated in the second half of 2022 as rising interest rates implemented by the Federal Reserve to combat inflation began to have an effect, dampening the confidence of home builders and instilling hesitancy in much of the construction-orientated PVC market.

Meanwhile, supply tightened as producers cut inventories towards the end of the year. This tightening was primarily on the export side as some producers pulled export offers for January and February. The domestic supply market has been less affected, but planned maintenance among multiple producers in the next few months could begin to encroach on domestic supply, just as seasonal demand begins to rise.

Producers have pushed for a total increase of 10¢/lb over the course of the first quarter, citing the recent market shifts. But in every case, domestic buyers have said the shifts haven't been significant enough to justify this larger increase.

By Aaron May