Since 2021, the global demand for polyvinyl chloride (PVC) has risen sharply, which has never happened since the global financial crisis in 2008. But by the middle of 2022, due to the rise of interest rates and the highest inflation in decades, the demand for PVC is rapidly cooling, and the price is also falling.
In 2020, in the first few months of the global outbreak of the COVID-19, the demand for PVC Resin used to manufacture pipes, door and window profiles, vinyl wall panels and other products dropped sharply due to the slowdown of construction activities. S&P's global commodity insight data shows that in the six weeks up to the end of April 2020, the price of PVC exported from the United States has plummeted by 39%, while the price of PVC in Asia and Türkiye has also dropped by 25%~31%. By the middle of 2020, the price and demand of PVC will rebound rapidly and maintain a strong growth momentum until the beginning of 2022. Marketers said that, from the demand side, remote home office and children's home online education have driven the growth of PVC demand for housing. On the supply side, for most of 2021, the high freight charges of Asian exports will make Asian PVC uncompetitive when it enters other regions. The United States has reduced its supply due to extreme weather events, interrupted multiple production plants in Europe, and continued rising energy prices, which have significantly increased production costs and led to a rapid rise in global PVC prices.
Market participants had predicted that the PVC price would return to normal at the beginning of 2022, and the global PVC price would slow down. However, the escalation of the conflict between Russia and Ukraine, the epidemic situation in Asia and other factors have had a profound impact on the demand for PVC. Global inflation has even triggered the rise in the prices of basic necessities such as food and energy, as well as the rise in global interest rates and concerns about economic recession. After a period of price rise, PVC market demand began to be curbed.
In the housing market, according to Freddie Mac, the average interest rate of 30-year fixed mortgage loans in the United States reached 6.29% in September, higher than 2.88% in September 2021 and 3.22% in January 2022. Stuart Miller, executive chairman of Lennar, the second largest house builder in the United States, said in September that at present, the mortgage interest rate has more than doubled, doubling the monthly payment, weakening the affordability of home buyers for loans, "greatly affecting" the U.S. real estate market, and is bound to curb the demand for PVC for construction at the same time.
In terms of price, the PVC markets in Asia, the United States and Europe are basically separated from each other. With the sharp drop in freight, Asian PVC regained its global competitiveness, and Asian producers began to reduce prices to compete for market share. American manufacturers also responded with price cuts, prompting PVC prices in the United States and Asia to decline first. In Europe, the price of PVC products in Europe is higher than before because of the continuous high energy price and potential energy shortage, especially because of the potential shortage of electricity, which led to the decline of PVC output from chlor alkali industry. However, the drop of PVC price in the United States may open the arbitrage window to Europe, and the PVC price in Europe will not be out of control. In addition, the demand for PVC in Europe also declined due to economic recession and logistics congestion.
