30 December 2009 03:20 [Source: ICIS news]
By Ng Hun Wei
SINGAPORE (ICIS news)--Asian polyvinyl chloride (PVC) prices are likely to remain firm at the start of next year due to high feedstock costs despite a seasonal lull in demand, markets players said on Wednesday.
Asian PVC prices have increased by around 7.6% in the past two months to $900-940/tonne (€630-658/tonne) CFR (cost and freight) China Main Port (CMP) even though a harsh winter in the key Chinese market had weakened PVC demand.
"Ethylene is the main culprit here. For the past months, it did not matter whether crude prices had softened or not. Ethylene prices remained stubbornly high," an Asian PVC producer said.
Ethylene prices registered a 15-month high of $1,160-1,200/tonne CFR NE Asia this month due to a combination of tight supply and strong demand from downstream sectors. EDC prices increased to $450-480/tonne CFR NE ?xml:namespace>
The trend appeared set to continue, market players said. Asian ethylene spot prices were set to mark fresh highs in 2010 due to persistent supply tightness and a heavy cracker turnaround schedule in the region.
Another Asian PVC producer said: "Because of the high costs, PVC producers will have to either raise prices or cut their operating rates. There is no other option." However, the producer acknowledged that a price increase was likely to be limited as demand would remain weak until February, after the week-long Lunar New Year holidays in
Crude and ethylene prices plunged to a multi-year low due to the financial crisis last year, allowing ethylene-based PVC to gain a cost advantage over the carbide-based grade. More than 70% of Chinese PVC producers are carbide-based while all other PVC producers in northeast
"We have even reduced rates at our ethylene-based PVC plant and instead increased production at our carbide-based PVC plant. There’s little reason why Chinese domestic buyers will find PVC imports attractive at the moment," a Chinese PVC producer said.
High feedstock costs and poor demand would present a tough business environment for PVC producers in 2010, but market players said they were hoping the upward pressure on ethylene prices would ease as many new crackers in the Middle East and
($1 = €0.70)For more on EDC, VCM and PVC visit ICIS chemical intelligence
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