PVC Prices Remain Unaffected by the Unexpected Strengthening of the Housing Sector in the U.S.A, How?

At the termination of June 2023, the PVC (Polyvinyl Chloride) price trend remained stable, and interestingly, the polymer most exposed to the housing sector witnessed no change and exhibit no recovery in the price trend in the last week of June 2023. As per the ACC (American Chemistry Council), the persistent uncertainty in the economic condition and the high risk of recession cast a bearish outlook on the consumer buying enthusiasm in the US market ahead restricting PVC market growth. In a soft economy, the PVC market participants have managed inventories cautiously during June 2023 and stabilized the PVC prices keeping a close eye on the impact of regulatory policies in the United States.

Furthermore, the moderate recovery in the demand for the housing sector, despite the Fed’s elevation in the interest rates in late June, as the housing market, is highly sensitive to interest rates and presently displaying remarkable resilience. The reason behind this surge is a shortage of homes for sale amidst constrained supply and outdated stock as per the US housing data. Thus, the lack of availability of supply and high rents may be the reason driving up the consumer buying enthusiasm for the new home.

As per the U.S. Census Bureau, the privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,631,000 which is 21.7% above the revised April estimate of 1,340,000 and 5.7% above the May 2022 rate of 1,543,000 and it is further continued the same trend in June 2023. The May rate for units in buildings with five units or more was 624,000 despite higher mortgage interest rates and tighter credit. Moreover, the housing downturn, which began last spring, might be stabilizing and supporting a "rolling recession" scenario, where different sectors experience recessions and recoveries at different times. The resurgence of the housing market has significant positive implications for the PVC and other polymer industry. However, the surge in US housing activity in the latest data may not be sustainable in the longer term to affect the PVC pricing dynamics amidst a downturn in the economic condition of the regional market.

Meanwhile, the overall strength in the housing market, key polymer, PVC, which is highly connected to the housing sector, has yet to witness signs of recovery in the US or globally. The US PVC market, which consists of 40-60% pipe production, remains subdued amidst a high level of inventories, fear of recession, and weak offshore demand fundamentals.

As per the ChemAnalyst, the PVC prices might gain slightly upward momentum in the H1 of July 2023, with an expected rise in the housing demand in the U.S.A and stability in the interest rates. Moreover, the PVC prices might get influence by the volatility in the upstream crude oil prices amidst rising supplies.