The North American PVC market may have to shed quite a bit of capacity to get back to a healthy profit margin, while Asian PVC demand is set to be flat in 2009, said Chemical Market Associates Inc. of Houston.
To get to a 90 percent operating rate by 2010, PVC capacity will need to be around 14.7 billion pounds, said CMAI's Steve Brien, global practice leader for chlor-alkali and vinyls. That's almost 3 billion pounds above the expected level of 17.5 billion pounds, Brien said at CMAI's World Petrochemical Conference, held March 24-26 in Houston.
Under current PVC supply-demand levels, North American operating rates should be around 73 percent this year and slightly above 76 percent in 2010.
In 2008, exports were the only sector to show growth in North America's PVC field. The market suffered and prices fell along with demand for construction-based goods such as pipe, siding, wire and cable, fencing and decking.
Brien also expects a comeback in North American PVC use in 2010, with sales climbing almost 11 percent to 13.6 billion pounds.
Excess PVC also is dampening markets in Asia. After falling 6 percent in 2008, Asian PVC demand is set to be flat in 2009, said Eddie Kok, who directs chlor-alkali and vinyl studies for CMAI.
But waves of new PVC capacity including almost 11 billion pounds expected in China between 2008 and 2013 will keep operating rates in China under 60 percent until 2011 and under 70 percent in Northeast Asia until 2012.
Almost 40 percent of new Chinese PVC capacity is set for the western regions of Xinjiang and Inner Mongolia and the central regions of Shanxi, Hena and Sichuan because of available coal. But Kok said that the coal-based acetylene route used to make PVC in China has lost its shine and now has costs similar to standard ethylene-based PVC production.
New PVC capacity already has made China more self-reliant in the material, reducing imports from more than 4 billion pounds in 2003 to less than 625 million pounds last year.