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PVC Prices Enter Cyclical Downturn

After a cyclical peak in the third quarter of last year, prices for PVC resins eased a bit in the fourth quarter. This decline was foretold last August, when the rate-of-change curves for PVC supply and demand intersected (see chart). Both of these curves peaked at the end of last year and are now descending.

The good news is that the descent should be short-lived, and both PVC sales and production will regain momentum later this year. Barring an unforeseen shock to the market, the downtrend in prices will be sustained until it becomes low enough to foster growth in sales.

The past two price downtrends lasted about 18 months each, and prices declined by an average of 16¢/lb. This time, the downtrend in prices is expected to last about nine months. Over this time, prices will fall about 9¢/lb, about half of the average of the past two cycles.

Demand for PVC resins will be buoyed throughout 2003 by the continued strength of the residential construction sector, and by increasing activity in the non-residential sector. Resin suppliers should not have trouble in setting moderate price hikes in the second half of this year. Fortunately for processors, economic conditions will be strong enough to allow some of the increases to be passed onto consumers.

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