OxyChem lowers full year guidance on economic concerns

US-based Occidental Petroleum's chemicals division, OxyChem, has adjusted full-year guidance down to $1-1.1bn in the face of economic challenges in China and the continuation of high interest rates by the US Federal Reserve.

Market participants throughout the polyvinyl chloride (PVC) chain had been hoping for much of the year that interest rate cuts would boost housing construction demand. But demand growth on a year-to-year basis has been milder than expected and flattening with each progressive month for most downstream buyers and converters.

OxyChem leadership concurred with the sentiment, saying the continued deferral of interest rate reductions had dampened its own trajectory for the year. Concerns over the broader health of the Chinese economy, as well as its internal consumption of PVC, has also been a recurring point of discussion within the US PVC market.

Global PVC export prices have been led by trends coming from Asia, and the recent moderating of freight costs from East Asia has made PVC from the region very competitive again in India, Africa, and even Latin America.

Despite the broader concerns, OxyChem reported a second quarter pre-tax income of $296mn for its OxyChem chemicals business, roughly in line with the company's $300mn guidance from last quarter, in an earnings call today.

This was an increase over a first quarter income of $254mn due to higher caustic soda and polyvinyl chloride (PVC) prices and sales volumes, but a decline from the same time last year when OxyChem earned $436mn in income.

By Cole Sullivan and Aaron May