FocusAsia PVC supply to tighten in Q2

31 March 2008 10:08  [Source: ICIS news]

By Ng Hun Wei

SINGAPORE (ICIS news)--A slew of plant turnarounds in Asia would tighten polyvinyl chloride (PVC) supplies in the second quarter, but it might not boost the already-high prices amid sluggish demand from the US construction industry, market sources said on Monday.

Some producers in the region have already shut their plants from March as part of their annual maintenance, but the bulk of it would be carried out between May and June.

PVC plants with a total capacity of at least 1.2m tonnes/year would be shut for turnarounds in Asia. These included Taiyo Vinyl and Vinythai which have shut in March.

In May and June, Shin-Etsu Chemical, V-Tech, Hanwha Chemical and Asahimas Chemical have planned turnarounds.

The impact of this year’s seasonal turnarounds on PVC prices was however expected to be muted compared with previous years, producers, buyers and traders said.

One reason was that US PVC makers were exporting their output as the slump in the US construction industry curtailed domestic demand, they said, adding that this intensified the price competition with goods from Asia.

Less than two months ago, the price of US material was around $1,055/tonne FOB (free on board) US Gulf, $35/tonne more than on an FOB northeast Asia (NE Asia) basis, according to global chemical market intelligence service ICIS pricing.

But last week, US prices were assessed $45/tonne below Asian values.

"Because of the poor PVC demand in the US, you can see in other export markets US-origin cargoes that are very competitively priced, particularly in Latin America and in some parts of the Middle East," said a South Korean producer.

US PVC exports had already increased 34% year-on-year in January, statistics from the US International Trade Commission showed. Brazil saw the largest year-to-year increase of imported US PVC, rising to 23,647 tonnes in January from 14 tonnes in the same period a year ago.

Latin America and the Middle East were also popular destinations for Asian cargoes and the presence of competitively priced US PVC in these markets left some Asian producers with fewer export options, sources said.

Another factor likely to dampen the effect of tight supplies resulting from the turnarounds was buyers’ reaction to the current high prices.

PVC price was assessed at around $1,120/tonne CFR China Main Port (CMP) on Friday compared with around $890/tonne a month ago.

Buyers were becoming more careful in making purchases since PVC prices exceeded $1,000/tonne CFR CMP and there was growing resistance to further price increases.

"A lot of buyers are wary of a sharp drop in PVC prices and several of them have stopped maximising their purchases…I don’t think they will readily accept big price increases," said a southeast Asian buyer.

April PVC cargoes had been heard settled at $1,110/tonne CFR CMP, a $40-50/tonne jump from March.

"Global demand for PVC is still strong despite the US situation but at these levels, I’m not sure if prices can keep on rising at the same rate," said a PVC producer.

($1=€0.63)

For more on PVC, visit ICIS chemical intelligence

By: Ng Hun Wei
+65 6780 4359

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly