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December 09, 2002 01:00 AM

Economist sees vinyl growth through 2020

Steve Toloken
Assistant Managing Editor
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    The success the vinyl industry has achieved in managing environmental challenges will put it on a path toward stronger growth, according to the author of a benchmark industry economic forecast.

    Irving Leveson, an economist and co-author of the industry's Vinyl 2020 study, told attendees at World Vinyl Forum 2 in Chantilly that he has upped his forecast for economic growth: He now thinks vinyl will grow worldwide at about 4.3 percent a year through 2020, faster than worldwide gross domestic product.

    Leveson helped prepare the report in 1997, and was back to deliver an update. His basic message - that growth in the developing world and the industry's ability to manage environmental issues, particularly in Europe - spell good things for vinyl.

    ``The long-run economic path is favorable,'' he said. ``Globally, demand will be helped by continued rapid increases in the economies of the developing countries, like China.''

    Under the scenario Leveson identified as the most likely, the industry will grow from $27.7 billion worldwide now to, in constant 2002 dollars, $59.2 billion in 2020. Other scenarios range from pessimistic, which sees the industry limping along to only $35 billion, to accelerated, which sees it topping $70 billion.

    Leveson said growth in India and in the former Soviet bloc looks to be stronger than predicted in 1997.

    China remains tough to forecast, but official projections of economic growth would put China's PVC consumption equal to Europe in 2020, he said. The number could be less, however, because some consider China's official growth projections overstated, he added.

    Leveson projects that China's PVC consumption will grow 9.1 percent a year, the highest rate in the world. India is to grow 5.8 percent, while developing countries in general are to grow 6.6 percent. He said he increased growth projections for India, the former Soviet bloc and Europe from his 1997 report.

    Industrial economies will average 2.9 percent growth, but Leveson projects sharp differences: The United States will grow 4.1 percent a year, while Europe will grow only 2.1 percent and Japan 1.8 percent.

    The head of the European vinyl industry's trade group, however, said at the event that he sees larger growth in Europe than what was projected.

    ``I don't see any reason why we should have such a difference in the future,'' said Jean-Pierre De Greve, executive director of the European Council of Vinyl Manufacturers in Brussels, Belgium. ``The growth in Europe is higher than in the U.S. at the moment.''

    The next decade will bring healthy worldwide growth in PVC consumption, but increasing pressure on profit and more reasons for the industry to consolidate, said Steven Brien, global business director for Chlor-Alkali & Vinyls at Chemical Market Associates Inc. in Houston.

    The 344 plants worldwide in 1980 will shrink to 309 by 2010, with North America showing the most pronounced drop, from 64 to 38. But North America's plants are much bigger, while Asia's industry will remain the most fragmented, with the smallest plants.

    Overall, the continued consolidation will mirror increasing pressure on margins, Brien said.

    ``This is a sign of not as good a return on investment as companies would like to see over time,'' he said.

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