Most PVC producers boost prices 8¢/lb

Market uncertain when the new prices will stick

by Tom Stundza -- Purchasing, 7/2/2008 9:05:00 AM

Faced with higher energy, ethylene and other raw materials, producers of polyvinyl chloride (PVC) resins are proposing 8¢/lb increases in sales prices. They’re likely to come in 4-cent increments each in July and August. This comes even though purchasing has dropped and it may be a while for such a large increase to be realized because of soft demand in such key markets as doors, windows, siding, fencing, decking, wire and cable and pipe and tube.

ICISpricing.com, a subscription news service, says domestic PVC demand has lulled due to the near-collapse of the housing sector, with sales unlikely to show any substantial turnaround in the near term. That’s why North American market prices for general purpose PVC have been stuck at an average 55¢/lb for the past three quarters—after rebounding off a nadir of 49¢ last June. However, due to expected materials-cost inflation, Purchasingdata.com forecasts PVC general purpose transaction prices for the next two quarters averaging 64¢/lb.

Still, market feedback says that most major U.S. producers have now followed Georgia Gulf’s leading move, which cited an “unprecedented escalation in key cost drivers” as justification for the larger hike. Georgia Gulf says a steep jump in ethylene costs and higher natural gas, electricity, and transportation costs boosted production expenditures above earlier forecasts and necessitated the resin increase.

ICISpricing.com reporters point out that supply may tighten because, as domestic demand has waned, “exports have continued to climb on the back of strong demand from Turkey, Russia, and the Asian markets.” Traders say demand for U.S.-made PVC from China is expected to rise as the year progresses when reconstruction efforts in earthquake-hit Sichuan province begin.

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