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CFR Robert Peterson stated on November 5 that OxyChem, the chemical division of Occidental Petroleum, expects PVC demand to remain strong, rather than seasonally declining as before repeated severe weather events in 2021 affected production.
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He said on the company’s third-quarter earnings conference call: “What we see in the chemical business today is still that our vinyl business is in very good condition, and the caustic business is also improving steadily.” “Usually, we usually It will enter a period of slower seasonality, but so far we have not seen this situation."
He said that after entering 2021, the supply was tight, and then in mid-February the U.S. Gulf Coast suffered severe freezing, resulting in a large-scale shutdown of petrochemical products, including at least 57% of the U.S. PVC production capacity, production was reduced by nearly two months.
Then Hurricane Ida hit Louisiana in late August, forcing approximately 41% of North American PVC production capacity to go offline. A few days later, when a third-party upstream vinyl chloride monomer plant was shut down due to equipment failure, Shintech had to shut down its 1.45 million tons of PVC plant in Texas, causing the total PVC production capacity in North America to drop to 59%.
Peterson said that the combination of these two weather events, coupled with strong demand for PVC, other chlorine derivatives and caustic soda, "makes the balance of supply and demand more tense than expected or the usual historical situation."
PVC is an architectural staple used in the manufacture of pipes, window frames, vinyl siding and other products. Chlorine is the first link in the PVC production chain. Caustic soda is a by-product of chlorine production and a key raw material for alumina, pulp and paper.
Peterson said that compared with January 2020 to November 2020, domestic PVC demand has increased by 13% so far in 2021, including a sharp increase in housing construction demand in the middle of 2020 as the coronavirus-related shutdowns eased .
He said that construction demand remains strong and inventories are still low. He said that although demand plummeted in April and May 2020 at the peak of the coronavirus shutdown, U.S. PVC exports in 2021 fell by a third compared to 2020 because of the freely available resin " Not available at all".
Peterson said that US PVC exports are mainly provided for contract customers, and the amount of PVC that is usually sold to the export market as a spot has been reduced, so manufacturers can meet strong domestic demand.
"It's a bit unusual at this time of the year, but we do see it continue to exist for the rest of the year," he said.
The last assessed price of exported PVC was US$2,060-2,070/ton FAS Houston November 3, which is a record high since S&P Global Platts began to assess the market in 1983. The last evaluation price of domestic PVC was 93.5-95.5 US cents/lb (2,061 US dollars)-2,105 US dollars/ton), which is also a record since Platts began evaluating the market in 2001, because buyers considered all four US The price increase of 5 cents/lb/110 US dollars/ton) sought by PVC producers.
As supply increases, PVC prices are expected to fall
Market participants expect that if Shintech's expansion starts before the end of the year to obtain more supply in one of its complex facilities in Louisiana, and there is a seasonal decline in construction activities in the colder months, then export PVC prices will fall in the next few weeks .
Peterson said: "We don't know how many people want to replenish inventory and prepare for another seemingly strong spring construction season, which will return early next year."
In terms of upstream chlor-alkali, he said that the supply of chlorine is still tight because manufacturers seek its best value, whether it is to produce PVC or other chlorine derivatives such as hydrochloric acid, polyurethane foam, refrigerants and other products.
In 2021, with the return of large gatherings of sporting events and concerts, the increase of travel, and the return of offices and schools, the demand for caustic soda has surged, all of which have increased the demand for paper products and aluminum.
Peterson said: "As the situation behind the pandemic has somewhat returned to normal, we are seeing a lot of pent-up demand still picking up."
Occidental Petroleum reported a net income of US$628 million, higher than the loss of US$3.77 billion in the same period last year. CEO Vicki Hollub said that the chemical sector reported net income of US$407 million, higher than the US$178 million in the third quarter of 2020, which was the strongest performance since 1990.
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