HOUSTON - PVC has become a star performer, and processors, like anyone seeking a star with top billing, can expect to pay top dollar for PVC performance. Industry analysts said at recent conferences in Houston that worldwide demand for PVC - up 5.5 percent in 1994 - gives PVC ``star'' status. Demand will continue to be strong this year, keeping pressures on prices, analysts said.
PVC prices jumped 60 percent from January 1994 to March 1995 because of strong demand and higher costs for feedstocks, analysts said. However, demand and prices are expected to reach levels this year that will reduce PVC's competitiveness.
``Worldwide, 55 percent of PVC moves into the construction industry,'' said Rick Smith, an analyst with CMAI, a Houston-based consulting firm.
Smith spoke March 23 at hisfirm's 1995 World Petrochemicals Conference.
Per capita consumption of PVC in industrialized countries is 400-500 percent higher than per capita consumption in less-industrialized areas, providing a huge opportunity for growth, Smith said.
``If these [less-industrialized] areas only move 10 percent toward the average per capita consumption of the more industrialized regions by 1999, the incremental increase in PVC demand beyond the current forecast would be 32 billion pounds,'' Smith said, which would represent a 79 percent increase in demand in four years.
Even without that move, Smith said he is being conservative in predicting that worldwide demand for PVC will grow nearly 16 billion pounds by 1999, at a rate of 5.2 percent per year.
In 1994, Smith noted, demand for PVC was 40.6 billion pounds.
Uses for PVC in such construction applications as window and door frames grew 35 percent in the United States between 1992 and 1994, he said. Such replacement uses indicate continued strong demand for PVC even in industrialized countries.
Mark House, an industry analyst with Dewitt & Co. of Houston, noted construction is booming in the Far East, keeping pressures on PVC demand. He spoke March 22 at Dewitt's annual Petrochemical Review.
House and Smith expect U.S. PVC suppliers to operate at historically high rates for the next five years. They noted that any slackening of demand in North America will be seized by export demand from the Far East, South America or Africa, helping to keep pressure on prices in North America. Overseas demand, especially from Asian countries excluding Japan, will be a major factor during the next five years, despite increases in production capacity for PVC in those countries, they said.
Although he noted PVC production capacity will be added, Smith expects capacity to lag demand through 1999.
Besides existing applications, replacement uses for PVC have been driven by environmental considerations that until recently drove up lumber costs, including new logging regulations, House said.
Prices for other raw materials that compete with PVC, such as aluminum, paper, glass and steel, also are rising. Smith also expects feedstock costs to continue to put pressure on PVC prices during the next five years.
With the growth of new PVC production facilities outside North America, Smith said, North American feedstocks producers will see attractive markets for their products, especially chlorine, for which a high initial investment is needed to add production capacity.
``World trade patterns are changing, with more international trade in PVC feedstocks expected to supply PVC facilities in developing areas, while growth of capacity, particularly in chlorine, will be slow due to investment requirements,'' Smith said. ``Feedstocks for PVC will continue to be a major issue to be dealt with in the late 1990s and early years of the next century.''
