17 December 2010 23:59 [Source: ICIS news]
LONDON (ICIS)--European polyvinyl chloride (PVC) December domestic prices were steady in December as flat demand hindered producers’ bids to raise prices by €15–30/tonne ($20–26/tonne), sources said on Friday.
Demand had largely tailed off over the week as freezing conditions across much of northwest Europe halted activity in the downstream construction industry, while converters began to wind down their operations for the Christmas holidays.
Many producers had begun the month looking for increases of €30–50/tonne, arguing that a minimum of €30/tonne was necessary in order to recoup the increased production costs from November to December, given the increasing cost of ethylene that had not filtered through to PVC prices.
Targets were then reassessed down to a more marginal plus €15/tonne by mid-December, as suppliers conceded that the market was not strong enough to absorb the full €30/tonne increase.
However, even this had proved challenging because of strict inventory control and slow construction activity, sources said.
As such, prices largely rolled over, with German free delivered (FD) December prices stable at €1,070–1,090/tonne according to ICIS pricing.
“We have already lost around €20/tonne on our margins [over November and December],” one producer explained, before adding: “Hopefully, we will be able to pass on some of the increase, but January is not the time for this. I am more hopeful that we will be able to get the margin back in the spring.”
This was echoed by buyers, who conceded that if ethylene were to spike dramatically, it would be very difficult to avoid increases in January, although most rejected the large targets of producers.
Other producers, however, seemed more likely to take a non-negotiable stance. One outlined that with margins already under pressure, it simply could not afford to absorb any more increases to production costs.
The producer was adamant that it would look to pass the full upstream movement through and recoup its recent losses in January, noting: “Buyers have to restock and there will not be a lot of product available. They will have no choice if they want the product.”
($1 = €0.76)
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