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Global PVC market estimated to exceed US$65 bln in 2019, demand to increase at 3.9% annually

Global PVC market estimated to exceed US$65 bln in 2019, demand to increase at 3.9% annually

30-Apr-13

The global PVC market is expected to reach revenues of more than US$65 billion in 2019, as per Ceresana. Now that the global recession has ended, the construction industry will again boost demand for PVC. The average annual growth rate of 3.3% seen in the past eight years is likely to be surpassed in future. Ceresana forecasts PVC demand to increase at an average annual rate of 3.9% over the next years. With a roughly 53% share of global consumption, Asia-Pacific is the largest PVC outlet, followed by North America and Western Europe. Shares in demand of the individual world regions will shift significantly over the next eight years. The analysts forecast countries in Asia-Pacific to increase their shares in the global PVC market - mainly at the expense of industrial countries. In contrast, emerging and developing countries will benefit from an increasing per-capita consumption of plastic products. In addition, the construction industry is boosting in these countries, where many PVC products are used in civil and structural engineering. Changes in regional demand will also have an effect on the production structure of manufacturers. The global PVC capacity of approximately 50 mln tons is anticipated to be expanded by 13 mln tons by 2019. Almost 80% of these new capacities will be built in the Asia-Pacific region. Most important buyers include manufacturers of pipes and conduits; they accounted for 39% of global PVC demand in 2011. PVC plastic profiles accounted for just less than 20%. Films and sheets had an 18% share. Cables and cable sheathing made up 7% of global PVC demand in 2011, and flooring had a 4% share. Other industrial applications, such as coatings for the automotive industry, medical products like infusion bags as well as shoes, accounted for approximately 13% of worldwide demand. All application areas will see similar development in demand over the upcoming eight years. As a result, shares of the individual application areas will hardly shift by 2019. Pipes and conduits will see the smallest increase in demand of 3.7% per year. However, this sector will remain the largest PVC market by 2019.

Global demand for Polyvinyl Chloride (PVC) has seen a steady increase over the last decade, and energy efficiency drives promise to push demand even higher, as per a report by GBI Research. PVC is used to make pipes, electrical wiring insulation, packaging and automotive products. Energy efficiency and conservation are becoming increasingly important globally, and the major PVC region of Europe has been concerned with PVC sustainability for some time. The Vinyl 2010 program was launched in the European Union, primarily aiming to secure voluntary commitment to the enhancement of sustainable production and use of PVC. This program proved a major success, and during 2010, around 260,842 tons of post-consumer PVC waste was recycled, exceeding the 10-year target of 200,000 tons. Based on this achievement, the EU has launched a Vinyl Plus program, which is expected to further the cause of PVC sustainability in the region. The demand for PVC is highest in Asia, where more than 65% of global PVC demand stems from, with China driving the majority of the demand. Demand in developed countries such Japan has largely stabilized, but the growing economies and large populations of developing countries such as India and China, means that they have huge consumption potential. Because of this, demand from Asia-Pacific will drive the PVC market in the future, and it is consequently vital to engage this region in Europe's sustainability efforts, in order to enhance energy efficiency and promote industrial recycling. Global PVC demand stood at 22,181,797 tons in 2000, before increasing to 32,308,053 tons in 2011. Global demand is expected to grow at a CAGR of 4.9% between 2011 and 2020, to reach 49,534,145 tons in 2020. The construction, packaging and electrical sectors were the leading end-use segments for PVC in 2011, with 17,973,299 tons, 3,660,405 tons and 2,721,256 tons of demand respectively, accounting for around 75% of global PVC demand altogether. The automotive, agriculture, footwear and other end-use sectors accounted for the remainder of global end-use demand.  A significant portion of the increase in demand for PVC was from the Asia-Pacific region, and the same trend is expected to continue in the forecast period. The Chinese construction sector is widely expected to be a driver for growth in the PVC industry in the next few years. Under China's 12th Five year plan, the government has vowed to build 36 million affordable housing units by 2015 to meet the demand from low-income families. The central government has now scaled-up financial support and local governments are being encouraged to make full use of financial provisions to fund construction projects. In addition, PVC demand from the agriculture, packaging, electrical and automotive sectors in the Asia-Pacific region is also driving growth. The demand from these PVC-downstream end-use sectors is witnessing strong growth of more than 6% on average, providing a further boost to overall PVC demand. The Asia-Pacific region will continue to account for more than 65% of global PVC demand in 2020 and global demand for PVC is expected to grow at a CAGR of 4.9% between 2011 and 2020, to reach 49,534,145 tons in 2020.

As per a report by GIA, PVC is projected to reach 49 mln tons by the year 2017. While improving infrastructure and housing conditions in the developing countries continue to sustain the demand for PVC, growth in the long term heavily depends on the resurgence in the construction markets in the developed economies and easing of the supply-demand imbalances. Global demand for Polyvinyl chloride (PVC) continues to remain clouded given the depressed business climate amidst the mounting debt crisis in Europe and slow economic recovery in North America. Growth in the PVC market is primarily driven by the construction industry which accounts for close to three-fourths of the resin demand. Near term growth is expected to remain anemic as the industry struggles to emerge from problems of protracted recovery in the construction sector, price volatility, and destabilization in supply-and-demand balances. After witnessing a tumultuous period of demand contraction in 2008 and 2009, owing to the financial crisis, and de-stocking that prevailed across the value chain, the PVC market witnessed an upsurge in demand, albeit at a sluggish pace in 2010. In 2011, PVC demand remained stagnant at 2010 levels, with no significant growth recorded in the end-use markets. Growth in the near term is expected to remain weak, undermined by the less dynamic pace in construction industry across the developed countries. Amid the slowdown, the market continues to undergo a phase of continued destocking as a result of high inventory levels, primarily in Europe. Developing countries in Asia-Pacific and the Middle East hold the best prospects for PVC in the long term. India is expected to witness a steady increase in demand stimulated by the growth in infrastructure and packaging sectors. Latin America is another region which holds bright opportunities for PVC. Higher growth rates are also anticipated in the Middle East with contribution from the oil industry. While Asia continues to remain the bright spot for growth in the PVC market, demand in China, the largest market for PVC, currently stands challenged amid the contraction in housing market as a result of government initiatives to temper the overheated economy in construction and housing sector. In order to soften the aggressive expansion in property market, the Chinese government introduced several measures such as non-issuance of loans for buyers of third home, hike in minimum mortgage rate and tightening of down payment conditions for second-home buyers. In Japan, with the nation currently focused on reconstruction activity, major share of PVC production is being diverted towards domestic consumption rather than exports. In Europe, outlook for PVC remains grim owing to the delayed turnaround in key end-use markets. Besides dull domestic demand, European producers face another problem of restricted export opportunities owing to low feedstock costs and increased capacity additions in emerging markets. Against the backdrop, operating rates in the region has dropped significantly, some by even 60-70%, thereby affecting manufacturer profitability across the value chain. With substitute products such as steel and concrete pipe gaining foothold, PVC manufacturers face stiff competition in addition to downward pressure on prices. In some cases these substitutes offer more durability and convenience as compared to PVC. Growing environmental concerns are also leading to a decline in the use of PVC resin, a trend further exacerbated during the economic slowdown. With the growth in infrastructure sector, remarkable growth in PVC is also on the card. The overall scenario in PVC sector is encouraging and providing excellent opportunities to the entrepreneurs to diversify businesses. However, the life cycle cost concept is not fully established in India, which creates hurdles in acceptance of the otherwise technically superior PVC products. Improving the energy mix to source atleast 25% of India's energy need from renewables would go a long way in ensuring stability", revealed Shailesh Haribhakti, Chairman, BDO Consulting Pvt Ltd at Vinyl India - 2012. Vinyl Industry in India is valued at over 20,000 crore with five major producers and over 600 processor making consumer and Industrial products. PVC has the largest application in pipes for irrigation, sewerage and building and construction. Other applications include window profiles, floorings and wire and cables.

According to Steve Brien, Senior Director, Global Organics, IHS, in today's market, the supply and demand for PVC is quite volatile, one of the primary reasons being due to the result of its position in the product lifecycle as well as regional differences in demand and production costs. Although, PVC is in the decline phase in North American and West European markets, it definitely seems to be growing in the BRIC countries. PVC consumption in India has grown over 10% pa in the past and future projections are also for double-digit growth. Present PVC consumption in India is 2 million MT per year. Infrastructure and housing sector are key drives for growth. Government of India 12th Plan projection for increasing manufacturing share in GDP from 18% to 25% is an indication for the growth potential for PVC Industry. S S Naik, Sr Vice President, Reliance Industries Ltd., was of the opinion that with the growth in infrastructure sector, remarkable growth in PVC and various downstream industries associated with PVC products manufacturing is also on the card. The overall scenario in PVC sector is encouraging and providing excellent opportunities to the existing and new entrepreneurs to diversify businesses and invest in new developments. However, the life cycle cost concept is not fully established in India, which creates hurdles in acceptance of the otherwise technically superior PVC products.

 
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