PVC Prices Are Falling. Why Warren Buffett Should Be Worried.

One thing leads to the other. Rising interest rates pummel housing. Lumber prices fall, some 60% this year. And, notes energy research firm and investment bank Tudor Pickering Holt, PVC—the plastic that makes pipes for plumbing and other uses—has seen average spot prices thud 46% quarter over quarter. That, in turn, reduces the profitability of companies that produce and sell PVC, which is made from ethylene, a petroleum product.

Other petroleum-based products are also struggling as the economy slows. The price of polyethylene, the most widely used plastic for bottles and bags, is off 24% in the latest quarter. Polypropylene, found in everything from food storage containers to vehicle parts, has fallen 32%.