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April 01, 2002 01:00 AM

CMAI: PVC in for slow, late rise

Frank Esposito
Senior Staff Reporter
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    Although things are looking up for PVC, the current early-year demand surge could be a false start tied in to very low PVC inventories.

    That's the viewpoint of industry analyst Rick Smith, who does not expect real improvement in PVC demand until late 2002 or early 2003.

    Smith, with Houston's Chemical Market Associates Inc. consulting firm, added that potential tightness in markets for PVC feedstock vinyl chloride monomer could affect a number of global projects in the next few years.

    ``If you're planning a PVC expansion without a corresponding VCM expansion ... you might want to rethink your strategy,'' Smith said at his firm's World Petrochemical Conference, held March 20-21 in Houston. ``VCM availability will be very tight for spot purchases.''

    CMAI anticipates U.S./Canadian PVC operating rates will climb slightly to 82 percent in 2002. Demand growth in 2002-03 should average 4 percent, according to the firm's projections.

    U.S./Canadian PVC statistics for 2001 offer a mixed bag. Total sales and captive use were up almost 2 percent, but taking out a 110 percent jump in export sales leaves the domestic market with a loss of about 3 percent, according to the American Plastics Council in Arlington, Va.

    Limited PVC capacity addition in the near future could cause prices and operating rates to escalate more quickly than they would in other commodity plastics that are more oversupplied, Smith added.

    Consultant Jon Hanson of Houston's DeWitt & Co. sees a similar picture for the PVC market, with the current upswing caused by buyers who were ``very intent on ending 2001 with very, very low inventories.''

    ``First-quarter demand from spring construction in North America was stronger than expected,'' Hanson said at his firm's World Petrochemical Review in Houston. ``Margins should improve in 2002, as price increases will more than offset raw material cost increases."

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