HOUSTON — Although consultants at recent petrochemical conferences painted a grim short-term picture for the North American PVC business, an industry executive said PVC makers will see opportunities in sales tied into home remodeling.
Rick Smith, a consultant with Houston's CMAI Inc., projected North American PVC growth from 1997 to 2002 at 3.8 percent, almost 2 percentage points less than the growth rate for the previous 5-year period.
This drop, according to both Smith and Pat Duke, a consultant with Houston's DeWitt & Co. Inc., is tied into a drop in exports brought about by the ongoing Asian economic crisis.
Smith expects exports to decline as international PVC demand is met by local production, while Duke foresees the lack of Asian demand causing ``significant price pressure'' in competition for the remaining business.
``PVC will be most affected by the Asian financial crisis,'' Duke said while addressing global polymer markets.
Southeast Asia still has tremendous long-term growth potential in spite of recent hardships, according to Smith, who said the region's PVC exporting total should average 21 percent growth annually between 1997 and 2002.
The North American PVC market has already felt the impact of the crisis, as prices have dropped an average of 2 cents per pound thus far in 1998 after dropping 4-5 cents in the latter half of 1997.
PVC resin plants will operate at less than 85 percent of their capacity in 1998 and 1999 before beginning to rebound, Smith said. Duke projects rates slipping to 84 percent in 2000 before climbing again.
Lou Maresca, vice president and general manager of resins for PVC maker Geon Co., projected similar operating rates and admitted industry profits haven't tracked growth.
``With all the growth, you'd think the industry was making money hand over fist, but that's not the case,'' said Maresca, whose Avon Lake, Ohio-based firm is North America's second-largest PVC producer. ``A larger share of our profits have been captured in PVC and vinyl chloride monomer production.''
But Maresca added Geon ``doesn't see overcapacity — we see strong demand supporting higher operating rates in the years ahead.''
``We're far from the top of the growth curve,'' he said.
Maresca linked his optimism to an upswing in North American remodeling expenditures, which has fueled demand for vinyl pipe and siding. Pipe, siding and other construction uses account for about 60 percent of North American PVC consumption.
Remodeling expenditures, which were less than $100 billion in 1990, should hit $130 billion this year, according to Maresca. The aging of North America's housing — 58 percent of which was built before 1970 — is playing a major role in this upswing.
``The potential to upgrade existing housing stock is tremendous,'' Maresca said. ``Demographics show there's an emphasis on remodeling through better merchandising and easy-to-use do-it-yourself guides.''
Remodeling is a better indicator of PVC growth than new housing starts, according to Maresca, although many industry analysts focus on housing start statistics. While new housing starts have stayed right around the 1.4 million mark annually in the 1990s, PVC sales have grown by 6.1 percent.