Mexican PVC demand sees weakness even as prices lower than year ago

Demand in Mexico for polyvinyl chloride, or PVC, was as of late August 2023 relatively weak with businesses that buy the resin to mix with plasticizers, to make compound products used across industries, having a difficult time placing the volumes that they had previously anticipated, a Mexican PVC and plasticizers market source said.

Image courtesy of Iada Michoko, Pixabay

“In reality, now, if we talk about market demand it is a bit weak, for example construction, I think it should be around 80% of the volume that we need to be selling, because the volumes are a bit low in that area,” said Luis Lopez, a Mexican PVC market participant that recently discussed prices, supply and long-term outlook.

Prices for Mexican PVC resin material in Mexico, on average, have seen declines of about 15% to 20% compared with a year ago, said Lopez.

PVC price levels in Mexico may appear similar in August 2023 to those at the start of the year but there has been much volatility in some periods during the first eight months of the year.

The Mexican PVC market

The Mexican PVC market is dominated by one Mexican producer and by other North American producers that export to Mexico from the U.S. like Formosa, Shintec and Westlake, Lopez said. Besides North American importers, there are also some Asian PVC importers into Mexico, he added.

The PVC market share of Orbia in Mexico, according to Lopez, is difficult to accurately estimate. But roughly, “Orbia must be covering about 60% to 70% of the market, while the other 30%, at least, must be imports,” he said.

Mexican producers of PVC composites for the further downstream industries need to mix the PVC resin with plasticizers to meet customer specifications for elasticity and strenght to serve the automotive, medical, clothing, packaging, construction and other industries.

“There are Mexican plasticizer producers, but still they all depend on alcohol produced in other countries, either from Asia or from the U.S.,” Lopez said.

“Everything that is alcohol used to make plasticizers is imported, brought from Europe, Asia, and we also bring manufactured plasticizers from Asia,” he added.

“When we consider that, Mexico is heavily reliant on imports from abroad,” he added. Mexican market participants that want to estimate prices rely mostly on price indices produced for U.S. products in the U.S. market, he said.

“What determines is how strong are the indices in the U.S. that is also moving our prices because obviously the U.S. resin demand is high, obviously affects the offer that will be sustained in Mexico,” he said.

Supply chain for Mexican plasticizers

“In the case of PVC in Mexico, the strongest demand, with the biggest impact, is definitely in construction that moves the market the most because in the construction industry there are many products and articles made with PVC, a material also in electric appliances, in the automotive industry, in industry in general, as PVC is one of the most versatile plastics,” Lopez said.

In Mexico products made with PVC resin can find demand also from the country´s large agricultural industry, as well as factories located near the border areas with the U.S., that make products for export to the U.S., and are called “maquiladoras.”

PVC resin suppliers sell “to many maquiladoras that make medical articles. It is very much used in medical areas, maquiladoras that make toys, they use much PVC,” he said.

PVC prices in Mexico

“In regard to prices, before the pandemic the PVC price was more or less very stable. Then there were some incidents like the hurricanes and all that, and prices went up” in Mexico, he said.

Currently, a small buyer that would have been buying around $1.50 per kilogram, $1.30 per kilogram, $1.40 per kilogram before the pandemic must now be paying over two dollars for some materials,” Lopez said. Larger buyers, due to their scale, can get lower prices.

Discussing PVC pricing “isn´t so easy because with PVC some products have calcium carbonate and are cheaper,“ he said.

Outlook for global PVC supply

Lopez said he agreed with Orbia´s top executives views, recently made public through a presentation of the company strategy before investors, that projected PVC supply may fall short of projected PVC demand before 2030 because there may not be enough planned investment in new capacity.

Officials at Orbia, the biggest PVC producer in Mexico, have said that they anticipate PVC supply shortages in the future globally. The company is considering the addition of new integrated production capacity in Texas. 

By Renzo Pipoli