The regional polymer price chart below shows the extreme divergence of prices between the US and Asia, and it has hit a level that has never been reached before. It is in part a function of the wave of new capacity that hit China in 2H 2020 and 1H 2021, which spurred oversupply in some chains, and the dysfunctional global trade backdrop that has kept global supply chains out of balance. As we noted earlier this week, the container costs alone to move polymers from Asia to the US are, best case, 34 cents per pound today, and this is estimate does not include the cost of moving the product to a port in China or from one in the US and also does not include a working capital charge for the time in transit. There would need to be an arbitrage of 10-15 cents a pound above this to make product movements between these regions worthwhile, assuming you can find a buyer in the US willing to experiment with imported products. The other trade impact is that US retailers and manufacturers are pulling on their US suppliers to maximize supply, pushing domestic demand for polymers above trend. The lumber price moves in the US – Exhibit 1 in today's daily report – if they spur incremental home building, it will be another boost for domestic PVC demand.
Source: Bloomberg, C-MACC Analysis, August 2021