In 2023, due to the sluggish demand in various regions, the global PVC market still faces uncertainty. For most of the year 2022, PVC prices in Asia and the United States showed a sharp decline and reached the bottom before entering 2023. In 2023, after China adjusted its epidemic prevention and control policies, the market expected a response; In order to fight inflation, the United States may further raise interest rates to curb domestic demand for PVC. In the context of weak global demand, Asia and the United States, led by China, have expanded the export of PVC. For Europe, the region will still face the problems of high energy prices and inflation recession. It is likely that there will not be a sustainable recovery of industry profit margins in the region.
Europe faces the impact of economic recession
Market participants predict that the sentiment of the European Caustic Soda and PVC market in 2023 will depend on the severity of the economic recession and its impact on demand. In the chlor-alkali industry chain, the profit of producers is driven by the balance between caustic soda and Pvc Resin. One product can make up for the loss of the other. In 2021, the demand for these two products is very strong, with PVC taking the leading position. However, in 2022, due to economic difficulties and high energy costs, in the case of soaring caustic soda prices, chlor-alkali production was forced to reduce the load, and the demand for PVC slowed down. The problem of chlorine gas production has led to a tight supply of caustic soda, which has attracted a large number of orders from the United States, and made the export price of the United States rise to the highest level since 2004. At the same time, the spot price of PVC in Europe fell sharply, but it remained the highest in the world at the end of 2022.
Market participants expect that in the first half of 2023, the European caustic soda and PVC market will be further weakened, because consumer terminal demand is restrained by inflation. A caustic soda trader said in November 2022: "The high price of caustic soda is causing demand disruption." However, some traders said that the caustic soda and PVC market will tend to normalize in 2023, and during this period, European producers may benefit from the high price of caustic soda.
The decline of US demand promotes exports
Market sources said that in 2023, the integrated chlor-alkali producers in the United States will maintain high operating load rate and strong caustic soda prices, while the weak PVC prices and demand are expected to continue. Since May 2022, the export price of PVC in the United States has dropped by nearly 62%, while the export price of caustic soda has risen by nearly 32% from May to November 2022, and then began to fall. Since March 2021, the production capacity of caustic soda in the United States has decreased by 9%, mainly due to a series of production stoppages of Olin, which also supported the strong price of caustic soda. In 2023, the strength of caustic soda prices will also weaken, and of course the decline rate may be slower.
West Lake Chemical is one of the PVC Resin producers in the United States. Due to the weak demand for durable plastics, the company also reduced the production load rate and expanded exports. Although the slowing pace of interest rate increase in the United States may lead to an increase in domestic demand, market participants said that the global recovery depends on whether China's domestic demand rebounds.
Focus on China's potential demand recovery
The Asian PVC market may rebound at the beginning of 2023, but market sources said that if China's demand did not fully recover, the recovery would still be limited. In 2022, the price of PVC in Asia fell sharply, and the quotation in December of that year hit the lowest level since June 2020. Market sources said that these price levels seemed to stimulate spot purchases, raising expectations that the decline might have bottomed out.
The source also pointed out that compared with 2022, the spot supply of PVC in Asia in 2023 may remain at a low level, and the operating load rate will be reduced due to the impact of upstream cracking production. Trade sources expect that at the beginning of 2023, the flow of PVC goods originating in the United States entering Asia will slow down. However, US sources said that if China's demand rebounded, resulting in a decrease in China's PVC exports, it might lead to an increase in US exports.
According to customs data, China's PVC export volume reached a record 278000 tons in April 2022. In late 2022, China's PVC export slowed down. As the export price of PVC in the United States fell, while the price of PVC in Asia fell, and the freight dropped sharply, thus restoring the global competitiveness of PVC in Asia. By October 2022, China's PVC export volume was 96600 tons, the lowest level since August 2021. Some Asian market sources said that China's demand will rebound in 2023 as China adjusts its epidemic prevention measures. On the other hand, due to the high production costs, the operating load rate of PVC plants in China has dropped from 70% to 56% by the end of 2022.
