North American PVC makers can blame falling prices on the weather, a great topic of conversation that they're sadly unable to do anything about.
Since June 1, average selling prices for suspension PVC have dropped 2 cents per pound, with single pennies coming out of the market in June and July. Previously in 2005, resin makers had succeeded in raising PVC prices an average of 4 cents per pound.
The reversal came as poor weather conditions in the Southeast United States and some parts of western Canada prevented building contractors from consuming as much PVC pipe as anticipated, according to several PVC buyers contacted recently. Based on a recent report from the American Plastics Council, rigid pipe and tubing accounted for about half of all domestic PVC sales in the United States and Canada. Other construction-related uses accounted for almost 22 percent, according to Arlington, Va.-based APC.
``Pipe sales have slowed down and distributors have too much inventory,'' a Midwest-based PVC buyer said. ``There's [construction] work out there, but contractors are behind because of the weather.''
The Commerce Department reported Aug. 16 that new home starts in July were down slightly from the previous month, but still were almost 3 percent ahead of last year's pace.
``Builders are working hard to keep up with buyer demand,'' said Dave Wilson, a custom home builder from Ketchum, Idaho, who serves as president of the National Association of Home Builders. ``Even though mortgage rates have edged up in recent weeks, they're still very affordable and continue to fuel the housing market.''
In an attempt to reverse the pricing slide, major PVC makers have announced price increases of 2 cents per pound effective Sept. 1. Buyers contacted said they were uncertain if the market would experience further price erosion in August.
On July 28, PVC maker Georgia Gulf Corp. of Atlanta reported that its first-half sales of chlorovinyls products - including PVC, chlorine and caustic soda - increased 8 percent vs. the first half of 2004 to almost $780 million. In the same comparison, GGC's operating profit in that segment grew 4 percent to almost $95 million.
Industry sources added that GGC is working to restore its vinyl chloride monomer feedstock plant in Lake Charles, La., to full capacity. A mechanical problem at the site has reduced VCM production and as a result has impacted the firm's PVC output.
Overall domestic PVC sales were down almost 2 percent in the first half of 2005, according to APC. Sales into rigid pipe and tubing were up almost 4 percent, but sales into siding and related uses fell almost 7 percent.