South Asia EVA hits new high on snug supply

26 July 2007 06:04  [Source: ICIS news]

By Helen Lee

SINGAPORE (ICIS news)--South Asia’s ethylene vinyl acetate (EVA) prices hit fresh highs this week due to robust demand growth and a lack of new capacities in the region and the Middle East but further gains may be limited, producers and buyers said on Thursday.

General purpose EVA values in south Asia rose to above $1,900/tonne CFR (cost and freight) for August/September shipments, while EVA with 18% VA content in China and southeast Asia rose $20-25/tonne to record highs of $1,820-1,845/tonne CFR.

Gains, however, may taper off in the fourth quarter when the traditional lull season kicks in, they added.

With another two months to go before the fourth quarter, prices - already at new seven-year highs - continue to head north.

Prices of the same material in the south Asian markets of India, Bangladesh and Sri Lanka were heard at $1,920-1,940/tonne CFR S Asia, due to the peak demand season from the downstream footwear/sandal sector, limited supply and high freight rates. 

"South Asia bound container freight rates have risen to $70-80/tonne, up from $50/tonne in April," a Taiwan-based producer said in Mandarin.

But some producers were hesitant to raise prices beyond the $2,000/tonne as that would kill demand.

"We think $2,000/tonne is the maximum as users will turn to additives," a southeast Asia-based producer said.

Southeast Asian offers to Bangladesh and Sri Lanka were pegged at $1,940-1,960/tonne CFR, reflecting a hefty $110-130/tonne hike from July deals, with the market expected to remain short.

An Indian trader and a Taiwanese producer said some August northeast Asian shipments were delayed to September as the producer had to fulfil previous orders.  

Some end-users in the downstream footwear/sandals sector were concerned about paying more for raw materials as they scrambled to extend their coverage of requirements up to five months ahead.

Nonetheless, most raised bids in order to secure September cargoes.

Bids were heard at $1,930-1,940/tonne, up $10-20/tonne from last week’s levels amid ongoing negotiations.

"It is very tough for us as margins are very squeezed and we are worried about September," a Delhi-based buyer said.

Sandal makers, however, had limited choices as they still needed to use a large portion of EVA in their production, traders said.

"Sandal makers still need to put in at least 80% of EVA and they could use at most 15% of additives such as PVC, otherwise the product is too heavy," one trader said.

The seasonally robust demand in south Asia fuelled the pricing outlook in the rest of Asia, based on concerns raised by traders and end users.

"If south Asian markets can fetch prices above $1,900/tonne, then the east Asian markets will be in shorter supply," an eastern China-based trader said in Mandarin. "But we think that prices here may not catch up with south Asia as Chinese demand usually dulls by August."

Chinese traders were largely sidelined since early July by the escalating prices ahead of the end of the peak demand season from the downstream footwear/slipper sector.

Most users had already secured August/September cargoes and it was risky to take positions at the moment, the traders added.

Several northeast Asian producers said they had increased production of the general purpose grade at the expense of higher VA content grade since March due to better netbacks for the former.

There is typically a $80-100/tonne gap between prices of low and high VA content material but that gap is increasingly difficult to maintain, Korean and southeast Asian producers said.

EVA producers in Asia include Taiwan’s FPC, Korea’s Hanwha, Singapore’s TPC, Thailand’s TPI Polene and China’s YPC – BASF.

By: Helen Lee
+65 6780 4359

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