Polyvinyl Chloride Resins
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Published: December 2011
Global PVC recovered from the recession in 2010 but not to the extent expected, as vinyl inventory supply chains had been only partially refilled by the beginning of 2011. Construction—the economic activity with the closest correlation to PVC sales—has also been slow to improve worldwide, based on business skittishness. In the United States, housing starts were up 6.7% in 2010 compared with 2009, after having declined on the order of 30% in 2008 compared with 2007. In fact, U.S. housing starts in 2009 fell to levels not seen since 1959. During 2008 and into 2009, home resales, another important indicator for PVC consumption, were also down to very low levels and as a result, the inventory of unsold homes remained near four million units through most of 2009.
In China, PVC consumption began to decline at the end of 2007 and carried on through 2008, registering a 9% decline. Improvement in this, the largest developing country, was a strong 16% in 2009, followed by another 16% in 2010 and continuing with an estimated growth of 6% in 2011. This contrasts with the United States and Canada, where the decline in PVC consumption was 33% in 2007–2009, improving only 1% in 2010, with another 2.5% expected in 2011. In Japan, consumption declined about 27–30% in 2007–2009 but surged 11.6% in 2010 only to fall an estimated 9% in 2011. As an example of the tepid nature of the recovery, in particular among developed countries, 2010 consumption finished only slightly ahead of that in 2006, four years earlier.
The following pie chart shows world consumption of PVC:
Over the next five years, expansions are planned mainly in areas that are currently large net importers of PVC—certain parts of Asia, the Middle East, Eastern Europe and South America. Africa and the Middle East will add capacity, with Iran adding the bulk of it by 2016. Asia will again add the majority (80%) of the world total, nearly all of it in China. While construction of some facilities will be delayed because of the world recession and dramatic slowdowns in the vinyl business caused by credit restrictions and the high uncertainty of the business, China will add significantly. China's buildup relates to its continued large investment in coal chemicals, including acetylene-based VCM production. The Middle East, in spite of its ultralow ethylene costs, is less attractive for vinyl chain investment compared with other ethylene derivatives, because of the need to export large quantities of caustic soda, which is coproduced with chlorine. On the other hand, the United States could be set to take advantage of its increasingly available shale-derived natural gas, which will keep costs for the U.S. chlor-alkali business globally attractive. Not only will the cost of U.S. ethylene—comprising 25% of the product—be the second lowest in the world, but the electricity-intensive chlor-alkali business will benefit from lower, natural gas–fed, power costs.
PVC is the most versatile of all thermoplastics because of the variety of its end-use forming techniques. PVC can be converted either into rigid products of considerable strength and hardness or into a variety of flexible articles when compounded with plasticizers. Rigid applications account for 65% of total consumption and provide most of the growth opportunities.
PVC use is highly dependent on the construction market, as about 70% of its consumption worldwide is for pipe, fittings, siding, windows, fencing, electrical and other applications. Also, PVC has increasingly been used as a replacement for traditional construction materials such as wood and metals, so its growth trend has been above that of the overall construction industry. For instance, the share of PVC pipe and fittings increased from 40% of total PVC use in 2008 to 43% by 2010–2011. Once construction industries in mature industrialized countries improve from the severe recession, PVC demand should resume its strong growth for piping and fittings, especially for telecommunications and natural gas. In the developing world, PVC pipe will grow rapidly, particularly for infrastructure for drinking water, sewage and drainage.