Global PVC demand declined by 8% in 2008, expected to decrease further in 2009

06-Oct-09

Worldwide PVC demand declined by 8% in 2008, and is expected to decrease further in 2009 as per a report by CMAI. Typically, PVC demand tracks GDP, albeit at a slightly faster pace, during periods of both positive and negative GDP growth. By the summer of 2009, the global economy was beginning to show signs of recovery in some geographic regions, and CMAI expects worldwide PVC demand to get back on a positive growth track. The damage to PVC demand wrought by the recent economic recession is best illustrated by recent market changes. Prior to the onset of the recession, the vinyls market quickly absorbed additional capacity as plants came on-stream; now, however, global operating rates have dropped significantly as global consumption has fallen far behind a still growing capacity volume. Early in the study period, the global market was undersupplied. When the global economy contracted, capacity expansions continued because most projects were too far along to stop; most of these capacity expansions were and will continue to be located in China. The report expects that capacity will be rationalized in North America, although actual closures have not yet been announced. Even with these hypothetical closures, the global PVC market is projected to be oversupplied by almost 4 mln tons by 2014. The supply/demand analysis suggests that more capacity will need to close in order to improve the margin environment in the industry. China will remain the single largest demand country in the world, and any supply/demand issues that occur in China will impact the global vinyls market. China will continue to add to its supply of VCM/PVC, mostly via the acetylene-carbide route, and as such, will be less reliant on imported PVC. Global trade in PVC fabricated products, primarily from China, is expected to increase due to lower priced labor and raw materials. This activity will continue to place downward pressure outside of China on some fabricated product markets, like wall coverings and floor and ceiling tiles.