FocusIndian PVC prices to fall further on weak demand

13 September 2011 05:26  [Source: ICIS news]

By Loh Bowei

PVC is used to make pipes for the construction and housing industrySINGAPORE (ICIS)--India’s polyvinyl chloride (PVC) prices are expected to continue declining over the next few weeks as a result of weak demand, tightened monetary policy and macroeconomic uncertainty, industry sources said on Tuesday.

Prices in India fell to $1,030-1,070/tonne (€762-792/tonne) CFR (cost & freight) India on 9 September, $70-90/tonne lower compared with prices two weeks ago, according to ICIS data.

Meanwhile, prices in China fell by $30/tonne from two weeks ago to $1,050-1,070/tonne CFR China Main Port (CMP) last Friday. In the Middle East, prices fell by $30-60/tonne to $1,030-1,060/tonne CFR Gulf Cooperation Council (GCC)/ East Mediterranean.

Major Indian producer Reliance Industries Ltd (RIL) has adjusted its domestic list prices downwards by Indian rupees (Rs) 3/kg ($63/tonne) to mirror the decline in import price levels, market participants said.

Participants are pessimistic about the price outlook of PVC in the coming weeks as buyers were heard to have withdrawn from the market last week because of the recent volatility in crude futures, said a trader.

“Few trades [for PVC] are being made,” an India-based trader said. “People are afraid.”

In addition, demand has been persistently weak because of the monsoon season, which lasts from July to mid-September, market sources said.

Above all, Indian players are most worried about the prevailing macroeconomic situation, traders said.

The Reserve Bank of India (RBI), the country’s central bank, is contemplating a further rise of interest rates from the current 8% to combat inflation, market players said.

The food price index in India rose by 9.55% from the previous year in the last week of August, according to government data, leading to suggestions that the RBI is likely to hike interest rates again.

“It is not just the PVC market that is [adversely] affected by the monetary tightening, but the entire Indian market at large,” said an India-based producer. “The slowdown in GDP growth to 7.7% is indicative of that.”

Despite the poor PVC outlook, industry players are hoping that demand for PVC pipes will pick up at the end of the monsoon season.

“About 60-70% of the PVC [in India] is used to manufacture PVC pipes and fittings, and we should see some improvement in demand when the monsoon is over,” said an end-user.

PVC is a versatile thermoplastic with a wide range of uses including pipes and fittings, cables, flooring, as well as films and sheets. At least 50% of the market is driven by the construction and housing industry.

($1 = €0.74, $1 = Rs47.22)

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By: Loh Bowei

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