FocusAsia PVC producers eye $40-50/t rise

07 April 2008 07:33  [Source: ICIS news]

By Ng Hun Wei

SINGAPORE (ICIS News)--Ethylene-based polyvinyl chloride (PVC) producers in Taiwan, Japan and South Korea are looking to raise their export offers for May cargoes by $40-50/tonne following the recent surge in the price of carbide-based PVC in mainland China, industry sources said on Monday.

Chinese carbide-based PVC, which is the most competitively-priced PVC grade, rose yuan (CNY)350/tonne ($49.86/tonne) to CNY8,500-8,550/tonne DEL (delivered) in the past two weeks alone while its export price rose $60/tonne to $1,110-1,130/tonne FOB (free on board) CMP (China main port) over the same period, largely on rocketing feedstock costs.

April cargoes for ethylene-based PVC were heard settled at $1,110-1,130/tonne CFR (cost and freight) CMP.

As buyers are generally willing to pay $30-50/tonne more for the ethylene-grade, the rise in prices of carbide-based PVC had provided ethylene-based PVC producers the leeway to increase their offers for May cargoes, sellers said.

“The Chinese domestic market is sometimes difficult for us because the local carbide-based PVC is very cheap. We can’t sell our ethylene-based PVC at a high price if we want to compete. But now that price of the carbide grade has increased sharply, we can raise our offers,” said a Japanese producer, who was mulling an increase of $40/tonne for his May offers to around $1,170/tonne CFR CMP.

Another factor supporting their aspirations to increase rates was the rising price of ethylene feedstock, which jumped over $50/tonne last week to $1,250-1,300/tonne CFR China on the back of tight supply, ethylene-based PVC producers said.

Sellers in Taiwan, Japan and Korea said they were likely to offer May cargoes within these two weeks. Possible offers heard ranged from $1,140-1,180/tonne CFR CMP.

The abrupt surge in prices of carbide-based PVC in the mainland came as a relief to some of the ethylene-grade producers, who had been worried that the continued economic uncertainties worldwide would finally end the recent bull-run in Asian PVC prices.

“Some sellers were preparing for possible rollovers for May cargoes because of buying resistance to the current high prices. But I think buyers now have to accept that they will have to pay more next month given that even the lowest-priced PVC grade had already increased so much,” said an ethylene-based PVC producer.

It remained to be seen, however if buyers were able to completely digest the $40-50/tonne rise in prices that producers were touting.

While April cargoes had already been sold at $30-50/tonne higher than March cargoes, buyers said they were unlikely to accept another $50/tonne increase.

“All we can say for sure is that prices for May cargoes would increase but whether it would be $50/tonne more, we don’t know. And given the economic uncertainties that remained, it’s also hard to say if prices would continue rising from May onwards,” a Taiwanese producer said.

Traders also noted that the some Chinese carbide-based PVC producers were currently under pressure to cut their operating rates to 60-70% due to rising feedstock costs, which suggested that the recent price hikes were largely cost-driven, rather than demand driven, putting question marks over its sustainability.

($1 =CNY7.02)

By: Ng Hun Wei
+65 6780 4359

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