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Driven by demand from China, PVC is expected to grow until 2020 |
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Polyvinyl chloride continues to be one of the world's most crucial plastics. As one of the oldest and most used products of the plastics industry, PVC came under attack 20 years ago by environmentalist groups. After numerous scientific investigations and improvement measures, the industry calmed the situation down: The environmental aspects of this durable and fireproof material are now often looked upon positively, the relatively minimal need for oil is also considered to be advantageous. A new market study from Ceresana Research shows that the PVC branch can expect to see continued growth. In 2007, the PVC world market reached a volume of 34 million tons, as compared to demand of 24 mln tons in 2000. However, the 5% annual rate of growth seen in the past will probably not continue. Nevertheless, Ceresana Research expects global PVC demand to increase by an average of 2% pa, despite the precarious financial crisis. PVC demand is forecast to total more than 40 mln tons by the year 2016. While Middle Eastern nations are implementing enormous expansions in production capacity for many other plastics, such as polypropylene and polyethylene (HDPE, LDPE, LLDPE), with PVC they are not able to profit as much from their abundance of raw materials. The reason for this: PVC consists of only 43% of the petroleum/natural gas derivative ethylene. For the most part, PVC is made up of chlorine, which can be obtained in a multitude of regions from the extensive supply of salt. PVC is particularly interesting to other world regions for this very reason. Majority of PVC manufacturers are located in China, whereby these often represent small, aged acetylene-based factories. Nevertheless, an increased number of modern production facilities with capacities of 400,000 tons or more are being constructed throughout the People�s Republic. Correspondingly, the trade balance is also changing: China is constantly becoming less dependent upon imports, and by 2009 PVC export amounts are expected to surpass import totals. PVC manufacturers in India are profiting from rising domestic demand. In contrast, the United States is dealing with excess capacity: Production capacity decreases in the amount of 2 mln tons are anticipated over the next several years, because otherwise no economical degree of efficiency will be reached. Of the nine primary application areas, whose development is extensively analyzed in the market study over the short- and long-term, the majority of global PVC demand currently originates from building construction and civil engineering, that is to say demand for pipes (38%) and for window profiles (20%). Other important areas of application include for example, films and sheeting, cable insulation, flooring, and shoes, as well as medical products, such as intravenous drip lines. However, substantial differences exist between the various regions. Demand for windows is rising considerably in Russia, for example, while in Asia pipe production is playing a vital role for PVC.
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.
As per a report by Global Markets Direct, Chinese demand will be the major driver for global PVC market up to 2020. Rapid increase in downstream capacity additions, primarily geared towards export markets, and the fast growth of the domestic construction industry were the main drivers of PVC demand in China. The Chinese government is currently undertaking a US$600 bln investment program to develop infrastructure in interior China, which will be the main driver of PVC demand in the future. China has the world�s largest PVC capacity using acetylene feedstock and most of the future capacity additions will also be based on acetylene feedstock. Even with these large capacity additions coming up in the country, China will emerge as the largest importer of PVC in the world. PVC demand in China will grow by 15% pa and account for 44% of the global PVC demand in 2020. During the last decade, PVC demand growth in the Middle East region was the second highest after the Asia Pacific region. Demand was driven by large scale construction projects in Iran, Saudi Arabia and UAE, which are some of the largest exporting countries of crude oil and natural gas in the world, and the high oil prices of the past few years have immensely benefited their economies. These countries have undertaken large multi-billion dollar projects to develop the physical infrastructure and industrialization in their economies, driving the demand for PVC. Demand from construction applications account for 85% of the region�s PVC demand and the large construction projects will drive the demand for PVC in this sector, and also the larger Middle East market. Over 30% of the global PVC demand comes from the developed markets of North America and Europe but the demand from these two regions is expected to remain stagnant to 2020. The absence of capacity additions in the downstream processing sectors, competition from cheap imports and the slowdown in construction and industrial activities are the main reasons for the bleak demand outlook in these regions.
North America accounted for 16% of the global PVC demand in 2008, and according to Global Markets Direct estimates, it will account for only 11% of the global PVC demand in 2020. The collapse of the construction industry in the US is the main reason for the PVC demand stagnation in North America. Europe accounted for 18% of the global PVC demand in 2008. This will reduce to 14% of the global PVC demand in 2020. The slowdown in the construction sector of the large economies such as Germany, the UK and Italy is the main reason for PVC demand stagnation in Europe. Growth from the Central and Eastern European countries will not compensate for the decline in industrial and construction activity in the major economies of Western Europe. The construction sector is the principal driver of PVC demand, globally. Low per capita consumption of PVC and greater economic development in the fast growing developing countries of China, India and Brazil are driving the global demand for PVC in construction applications. Pipes & tubes and profiles account for the bulk of the PVC demand from this sector, with pipes & tubes accounting for nearly half the demand for PVC from construction applications. A significant number of the population in these developing countries lack basic infrastructure including housing, potable water and sanitation facilities and the work undertaken by these countries to address this situation will drive the demand for PVC from construction applications. Hence, demand for PVC in construction applications from the developing countries will compensate for the slowdown in traditionally large markets of North America and Europe, and account for 61% of the global PVC demand in 2020.
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