One of the striking conclusions from our Weekly yesterday (charts 41-43) was the steady upward march in PVC pricing in all regions – everywhere is at 5-year highs, the US, Europe, and Asia. While it is very easy to be distracted by the spikes in polyethylene and polypropylene pricing, we believe that these price rises are far more impacted by the spike in consumer durable spending, production outages, and global supply dislocations than PVC, which we have believed for some time has better longer-term fundamentals and will benefit from infrastructure spending increase, while not being materially impacted by a consumer flip from durables to travel.
We see a couple of comments today about the demand for new China-based lithium availability – or future availability. While we note that many of the US and European automakers are looking to decrease their reliance on China in all aspects of the supply chain, there are plenty of other countries making or planning to make EV’s that do not have supply chain concerns, including of course China itself. Lithium is a global commodity and any additional supply anywhere will impact the global balance. We still believe that supply is being added at least as fast as demand and that it will likely lead to some dramatic pricing and profitability swings for years to come.
We also comment on the wild ride in propylene – shown in today's report. We believe that this is a restart timing issue and that when all propylene consuming units are back on line, propylene could remain tight until refining rates improve. Propylene derivative pricing and shortages – see the foam shortage headline – suggest that pent-up demand for propylene is high.