Iberian Dec PVC rolls over, pressure grows on margins

10 December 2010 17:02  [Source: ICIS news]

LONDON (ICIS)--Improving availability and dwindling demand made it impossible for polyvinyl chloride (PVC) producers to achieve their targeted increases of €30-50/tonne ($39-66/tonne) in Iberia, market players confirmed on Friday.

Strict inventory management ahead of the year end and the resolution of several recent production problems in the Mediterranean had lead to an increase in supply into Iberia, where demand remained well below expectations on slow construction activity. As such, Spanish PVC prices remained steady at €975-990/tonne FD (free delivered) according to ICIS. 

Elsewhere in Europe, negotiations were largely ongoing although contracts were expected to settle earlier than usual due to the Christmas holidays.

Several producers were adamant that they would remain firm in their bid to pass at least €30/tonne through to buyers in December, as the €27/tonne increase in upstream ethylene prices equated to increased production costs of €15/tonne, while most had been forced to absorb an additional €5-10/tonne in November.

However, the recent cold snap across much of northwest Europe, coupled with strict consumer order intake, had further limited off-take for product over December.

“The freezing conditions have frozen PVC activity too,” a producer said. “Demand will disappear completely next week as converters close down their operations for Christmas, so we are not expecting that there will be much chance to increase prices.”

A similar sentiment was echoed by others sellers, who conceded that the majority of business in December would be concluded at a rollover, although several felt that hikes of around €15/tonne would be possible at one or two lower priced accounts. 

For the majority of producers, however, the main concern was currently the upcoming January ethylene contract price discussions, which were expected to get underway next week. Price ideas centred on an increase based on firm crude and naphtha and robust demand. Increments ranged from €80-100/tonne in some cases.

PVC producers were dismayed by this news, as they acknowledged that it would be extremely difficult to capture the potential increased production costs in January, traditionally a short working month with low demand.

“We already have margin to make up from November and December. It will be almost impossible to push large hikes through to buyers in January,” one manufacturer said.

However, the strongly performing caustic soda market (a by-product of upstream chlorine production) could provide some relief for integrated chlor-alkali producers, as first quarter 2011 hikes were already being talked in a €50-70/dmt (dry metric tonne) range although negotiations will not get underway in earnest until next week.

($1 = €0.76)

For more on PVC and caustic soda, visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Stephanie Wilson
+44 20 8652 3214

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