28 January 2011 16:17 [Source: ICIS news]
LONDON (ICIS)--European ethylene dichloride (EDC) spot prices gained $10–20/tonne (€7–15/tonne) on improving buying interest and higher feedstock costs, market sources said on Friday.
A supplier reported that it had concluded one deal close to $500/tonne FOB western Europe, as the upstream ethylene increase of €25/tonne for February contracts had renewed EDC buying interest among downstream polyvinyl chloride (PVC) producers.
Indeed, the higher costs of ethylene, rising energy prices and negative electro-chemical unit margins meant it was more economical to purchase EDC than manufacture it, sources said, as many derivatives of chlorine (and its co-product caustic soda) were underperforming in terms of price and offtake.
Equally, though, this was exerting some downward pressure on the intermediate EDC – which has its main use in downstream PVC production – as disappointing values and demand from the PVC market made it difficult to push prices above $500/tonne FOB western Europe.
“The $500/tonne mark is a bit of a mental block for buyers,” a key trader noted. “Once it goes beyond that sort of level, they start to say it is much too high, but the reality is there is very little available.”
This was echoed by a second seller, who said: “Unless prices go above $500/tonne, producers will stop making it; there’s no margin at the current level.”
As such, a number of traditional sellers said that they were not offering into the merchant market, opting instead to balance internal consumption.
At least three buyers that were looking to purchase material were still mulling over offers for February deliveries.
One outlined that it “would not accept prices above $480/tonne as there’s no profit margin left at this level once it is converted into PVC”.
However, for those PVC producers with upstream technical difficulties, there was little option but to buy EDC at levels of $480–500/tonne FOB western Europe.
One chlor-alkali manufacturer conceded: “Unfortunately, we are runing at 20–25% in our chlorine unit, but we have 80% of our PVC capacity running on a base of supplied EDC.”
($1 = €0.73)
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