The prices of PVC from the US and China usually track each other fairly closely, but they diverged significantly during 2012. Prices in the US rose in the second half of 2012 as a limitation in domestic supply due to plant closures coupled with an increase in domestic demand as the US housing market improved and Hurricane Sandy led to an increase in PVC demand for reconstruction. PVC prices in China were kept stable by a low level of domestic demand and a high level of production overcapacity.
Polyvinyl chloride (PVC) is one of the most produced plastics globally, accounting for around 20% of all plastics used worldwide. While global PVC production capacity has now reached almost 50m tonnes, annual global consumption typically only reached around 35m tonnes. 35% of the demand comes from China and Europe and North America are each responsible for a further 15%.
The main application for PVC is for use in pipes used to carry water and sewage; the plastic can provide a cheaper, tougher, more corrosion resistant alternative to traditional materials such as metals. PVC also has many other uses in the construction industry such as frames for windows and doors, flooring, facia boards, and guttering. Outside construction, PVC is used for coating electrical wiring, tarpaulins, clothing, vinyl records, and signs. Different additives combined with the PVC provide the correct properties needed for each application.
Most of the world, including the US, uses crude oil (or increasingly, natural gas) as a feedstock for the production of PVC. In China, however, the main feedstock is coal due to the relatively abundant domestic supplies. While the price of coal in China has fallen in the past year, the price of crude oil has remained at a high level. Also, the price of natural gas rose seasonally in the second half of 2012, further increasing the gap in the two region's PVC prices.