Europe PVC sellers’ price targets slip on competition

11 March 2011 16:22  [Source: ICIS news]

LONDON (ICIS)--European polyvinyl chloride (PVC) producers’ resolve to raise prices for March already appear to be weakening as adequate availability and lower offers exert pressure on the market, sources said on Friday.

The majority of producers have already adjusted their initial nominations of plus €60-100/tonne ($82-137/tonne) to a more moderate increase of €40-50/tonne, while one or two more aggressive sellers are still holding firm to their targets of €60-80/tonne.

With upstream ethylene spiking €60/tonne in March, all manufacturers outlined that it is imperative to cover the monomer movement – which equates to an increase of €30/tonne in PVC production costs.

The majority also said there was a need to recoup the losses made in the final months of 2010, when ethylene increases had outpaced those seen in the PVC market by some €30/tonne.

However, at least one producer confirmed it has already concluded deals with hikes of a more nominal €30/tonne, and continued to offer at this level.

“You cannot get above €30/tonne,” the source said, before adding: “There is no shortage. The market is completely balanced and you cannot raise prices when this is the case.”

Many producers expressed frustration with this selling strategy, with one affirming that competitive offers are the main factor undermining the bid to increase: “Its very disappointing and I do not understand these aggressive producers. Material is not long and we need more than the ethylene just to be comfortable but we cannot get it so long as there are these producers giving margin away.”

Another manufacturer said that unless the demand and supply balance was to shift within the next week, others will be forced to follow the lower settlements, although the bottom line for most would be €40/tonne. 

The source outlined: “Demand still needs to pick up a bit yet, at the moment it just does not support the increase [above €30-40/tonne]. Consumers are sitting on their hands because of the oil price and they are struggling to get their own prices up. No one is taking more than they need.”

A similar sentiment was echoed by the majority of converters, who said there is no problem in sourcing product.

However, several large converters still anticipated hikes of €10-20/tonne above the monomer movement, which will leave the total increase at €40-50/tonne.

One converter said: “We are still negotiating. Obviously the producers want to get monomer plus where they can and its clear that there are no good margins for them in PVC right now.

“At the moment, stocks are covering demand, but there is very little flexibility and the maintenances will probably make supply tighter over the next few weeks. We expect that they might be able to get €10-15/tonne above the ethylene.”

($1 = €0.73)

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By: Stephanie Wilson
+44 20 8652 3214

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