18 February 2011 23:59 [Source: ICIS news]
LONDON (ICIS)--European polyvinyl chloride (PVC) producers missed their targets for the fourth month in a row as February prices settled with lower-than-expected increases of €20-30/tonne ($27-41/tonne), exerting further pressure on margins, sources said on Friday.
Producers had started the month looking for hikes of €50-80/tonne.
Many had outlined that a movement of at least €60/tonne was necessary in order to firm margins and recoup the losses that have been absorbed by the industry since November 2010, when upstream ethylene began its steady upward trend, outpacing movements in the PVC market.
However, the traditionally slow demand over the winter period, ample availability and some aggressive selling continued to undermine the bid to increase, capping the hike at just €20-30/tonne depending on the buyer size and location, and the starting point of negotiations.
“There is a really wide spread of offers and it is confusing,” one seller in the Mediterranean outlined. “Some producers are interested in volumes, others in prices, so some are flexible while others are not. I think the average increase has come out around €20-30/tonne”
This was echoed by the majority of consumers, who also reported a wide spread of offers.
After seeing the most significant gains in January – when demand had largely eclipsed expectations – prices in Iberia were under the most pressure in February, gaining just €20/tonne to trade at €1,040-1,060/tonne FD (free delivered) according to ICIS.
Buying interest in the region had slipped back to what most players considered normal levels for the time of year.
Values across much of Europe climbed €20-30/tonne, while the movement was slightly narrower in Germany, Italy and France, where the increase was largely capped at €20-25/tonne, bringing prices in line with those seen elsewhere in northwest Europe.
Although the latest increase left the movement over January and February at an average of €60/tonne, most producers were adamant that further increases would be necessary.
A major chlor-alkali producer noted: “We do not have enough [of an increase] yet. We will have to push another big increase through in March.”
Although there was no clear indication from the upstream ethylene market, the majority of PVC producers expected ethylene prices to be largely steady to slightly firmer in March, providing some relief.
Most were also optimistic that this potential stability upstream would coincide with a rebound in demand, as construction activity traditionally gets underway in March, while a slew of upcoming maintenance shutdowns could tighten availability in the market. This would enable sellers to target another significant increase in the coming month, sources said.
However, there were some early signs of weakness in the polymer markets this week, which were causing concerns among PVC sellers.
One manufacturer said: “We have to recover the ethylene before polymer pricing [polyethylene and polypropylene] collapses; this will close the window of opportunity for PVC sellers to raise prices because the ethylene will go down.”
($1 = €0.74)
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