US housing starts in September climbed 1.9% to 1.415 million units from August, and were 11.1% higher than in September 2019, US Department of Commerce data showed Oct. 20.
The swing reversed a 5.1% month-on-month decline in August, illustrating demand and pricing trends for polyvinyl chloride, a construction staple used to make pipes, window frames, vinyl siding and flooring, and other products key to homebuilding.
Single-family housing starts in September reached 1.108 million units, 8.5% higher than in August, reflecting a continued consumer push for separate and larger spaces amid the coronavirus pandemic.
Privately-owned housing completions in September reached 1.413 million units, up 15.3% from August, and 25.8% up from September 2019, the data showed.
Meanwhile, privately-owned housing units authorized by building permits in September reached 1.533 million, up 5.2% from August and 8.1% up from a year ago.
Single-family building permits authorized in September reached 1.119 million units, up 7.8% from August, the data showed.
Jeffrey Mezger, CEO of US homebuilder KB Home, said during the company's quarterly earnings call on Sept. 22 that the company paused land development and construction of model homes amid the height of pandemic-related shutdowns, which stalled construction activity.
However, as shutdowns eased amid historically low mortgage interest rates, the US has seen a boom in home sales, he said.
"In particular, the demand for new homes has risen because of perceived health and safety benefits, energy efficiency advantages, smart technology features and a desire to move away from dense urban areas," Mezger said.
KB Home's third-quarter net income of 78.4 million was 15% higher than in the third quarter of 2019.
PVC prices strengthen
PVC prices have strengthened alongside housing demand growth. Domestic PVC prices fell 8 cents/lb ($176/mt) to 47 cents/lb in April and May when demand cratered amid shutdowns. However, prices regained that and more, climbing 9 cents/lb in June, July and August to 56 cents/lb, a five-year high, when PVC demand rebounded to feed the housing rush.
All four US PVC producers are seeking additional price increases of a cumulative 12 cents/lb for September and October.
Negotiations are ongoing for the September increases, and market sources are skeptical that the entire 8 cents/lb would be accepted, much less the additional 4 cents/lb sought by OxyChem for September and Formosa Plastics USA, Westlake Chemical and Shintech for October. OxyChem is the chemical division of Occidental Petroleum.
"Realistically, end-market consumers will have a difficult time in accepting all these price increases," a market source said, noting that the US economy remains challenged amid COVID-19.
The International Monetary Fund's October World Economic Outlook projects the US economy will contract by 4.3% in 2020, compared with a 2.2% growth in 2019, with a swing to 3.1% growth in 2021.
US PVC supply remains tight
Westlake Chemical declared force majeure Aug. 31 on US PVC and upstream vinyl chloride monomer after Hurricane Laura's Aug. 27 landfall knocked out major transmission lines in Lake Charles, Louisiana, where its operations include chlor-alkali, ethylene dichloride and vinyl chloride monomer.
The company had to shut down restarted chlor-alkali operations ahead of Hurricane Delta's Oct. 9 landfall as well.
Prior to that, Formosa Plastics USA declared force majeure Aug. 14 on US PVC from its Texas and Louisiana sites because an upstream chlor-alkali turnaround that lasted several weeks longer than planned left downstream intermediates depleted. Formosa's operations were not affected by the storms.
Both force majeures remained in effect Oct. 20.
In addition, overall US chlor-alkali rates have remained in the mid-low 70% range since plunging to 68% in April from 90% in March. In 2019, rates in May through September were in the mid-80% to low 90% range, reflecting the typical PVC demand peak during the summer height of annual construction season.
But in 2020, producers have maintained lower chlor-alkali rates, in part to keep caustic soda inventories in check amid weak industrial demand, and amid uncertainty of how sustained PVC demand may be given COVID-19 surges. Caustic soda, a key feedstock for alumina, and pulp and paper industries, is a byproduct of the production of chlorine, the first link in the PVC production chain.
The resulting tight PVC supply has also helped more than double export PVC prices to a nine-year high of $1,150/mt FAS Houston from a 12-year low in April of $520/mt FAS, S&P Global Platts data showed.
