PVC growth to remain anemic on sluggish recovery in construction, overcapacity, thinning operating margins

10-Feb-11
Polyvinyl chloride (PVC) constitutes the second-largest thermoplastic manufactured worldwide after polyethylene. Though the PVC market is back on its growth trajectory after experiencing collapsed demand in several markets, overall performance is expected to remain anemic over the short term as the industry struggles to emerge from problems such as sluggish recovery in the construction sector, lingering overcapacity and thinning operating margins, as stated by the new market research report on Polyvinyl Chloride (PVC), as per Global Industry Analysts Inc. The year 2011 is expected to be another unstable year for players in the PVC market as they continue to wrestle with slow demand and high production costs to re-gain the operating margins recorded during pre-recession times. The global market for PVC products witnessed a contraction in demand in recent years owing to the financial crisis, and de-stocking that prevailed across the value chain. Various end-use markets such as construction, consumer goods and packaging registered a fall in activity, across the world. Manufacturers in the US and Europe encountered weak demand in the domestic markets due to slowdown in construction activity along with tight credit conditions. Middle East, which witnessed high consumption levels before financial crisis, experienced a decline in PVC demand as various infrastructure and construction projects got delayed due to the financial crunch. Besides, the Asian economies also registered a fall in consumption owing to the slowdown in construction projects. PVC is also known as an 'infrastructure plastic' with the construction market accounting for about 60% of total demand. Developing countries in Asia-Pacific and the Middle East hold the best prospects for PVC in the long term. Among these, China and India represent the most promising markets due to large population size and infrastructural development initiatives. India is expected to witness an increase in demand due to the growth in infrastructure and packaging sectors. China represents the fastest growing market for PVC with a projected CAGR of 4.7% during the analysis period. In Russia and Ukraine, demand for vinyl continues to grow due to increased demand from the construction industry, regardless of the economic slowdown in the region. Higher growth rates are also anticipated in Middle East and Eastern Europe with contribution from the oil industry. Latin America is another region, which holds bright prospects for PVC growth during the forecast period owing to increase in construction activity. In near future, new capacity additions in the market are expected to stem from Asia and the Middle East, while the developed economies of Western Europe and North America are expected to delve with high feedstock and energy costs. The declining US housing market made a significant impact on the country's PVC demand as the market faced a challenging environment in the form of poor construction activity, termination of financial incentives for residential property buyers and unrelenting credit limitations. The fall in demand was also be attributed, though partially, to rising imports of finished goods. PVC growth in Western Europe is expected to remain weak, as PVC continues to face reduced demand from the construction sector. In Europe PVC is largely used in fittings, pipes and window profiles. Other applications such as bottles and packaging continue to register decline in favor of polyolefin and polyethylene terephthalate (PETLeading market participants covered in the study include Arkema, Chemplast Sanmar Limited, Chemson Group, Ercros SA, Aiscondel, Formosa Plastics Corporation, Formosa Plastics Corp., INEOS Group Ltd, INEOS Vinyls Limited, Georgia Gulf Corp, Limburgse Vinyl Maatschappij (LVM), LG Chem, Mitsubishi Chemical Corporation, Occidental Chemical Corporation (Oxychem), OxyVinyls, PolyOne Corporation, Shin-Etsu Chemical Co., Ltd., Solvay, SolVin, Vestolit GmbH & Co. KG, Vinnolit GmbH & Co. KG, among others.
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