Supply Disturbances Drives CPVC Prices in Mexico Amidst Demand Improves

The market situation of Chlorinated PVC (CPVC) witnessed a bullish situation in the US and Mexican markets despite prices of feedstock Vinyl Chloride Monomer (VCM) and Poly Vinyl Chloride (PVC) witnessing a bearish market situation which was anticipated to ease the production costs during the month of December 2023.

The prime reason for the bullish market situation of CPVC in exporter USA and Mexico is largely due to well performing construction industry in the Mexican market which contributed to a high demand for the product. The demand of CPVC from the industrial and construction sector was recorded to be healthy in Mexico which counteracted prices. The improving construction industry in Mexico is largely evidenced by increased funding from the Mexican government which showed an uptick of 0.4% in November 2023 with further appreciations expected in December 2023 as nearshoring activities continue to increase consequently increasing the demand of CPVC. Commencement of construction of new factories was largely indicated by the approvals by central government of Mexico which permitted major players of the automotive and chemical industries to set up manufacturing centers across Mexico because of increasing input costs across the United States.  Business sentiments amongst investors continue to remain in positive territory as indicated by the fifth consecutive increment in the number of jobs created in the construction industry. Also, the heightened demand of CPVC is also attributed to the completion of government projects across Mexico, which indicated by the construction of new railway line along the East corridor and the completion of airport at the state of Tulum as result of increased tourism activities.

Furthermore, the congestion of Panama Canal extended and remained persistent throughout December 2023, which consequently limited the size of inventories of CPVC into Mexican market which also can be considered for increased prices of CPVC. Limited supplies of CPVC are also supported by declining manufacturing sector which contracted for the fourth consecutive month as result of overall declining workloads and job shedding extending into December 2023. US manufacturers overall noted a decline in new orders and sales with exports also retreating again into contraction in December 2023 with inflationary conditions recorded to have intensified.

Prices of CPVC are expected to appreciate in January 2024 largely driven by the importing Mexican market as result of well performing construction industry and anticipations of increments in production costs which are indicted by rising prices of upstream Crude Oil as the effect of supply restrictions imposed by OPEC+ members take effect as the demand for gasoline and diesel increases.