25 November 2011 23:59 [Source: ICIS news]
LONDON (ICIS)--European polyvinyl chloride (PVC) contract prices for November have decreased by €50–60/tonne from October, with no business heard above €1,100/tonne FD NWE, sources said on Friday.
Prices at €1,080-1,095/tonne ($1,440–1,460/tonne) FD (free delivered) NWE (northwest Europe) reflect non-discounted business between producers and medium- to small-size buyers. Figures in the mid- and low- €1,000s/tonne and even high-€900s/tonne are representative of business between producers and buyers purchasing large quantities.
Some European producers maintain reductions have not gone beyond €30–40/tonne. However, most market players seem to agree that no contractual business for November is being done above €1,095/tonne FD NWE.
November contract prices in the Mediterranean have also decreased substantially. In Spain, values have dropped by €50–60/tonne to €945–955/tonne FD MED (Mediterranean). In Italy, prices are down by €50/tonne to €1,015–1,035/tonne FD MED.
Price drops have gone far beyond the reduction suggested by November ethylene contract figures, which settled at €1,095/tonne FD NWE, down by €20/tonne from October.
Slow demand and ample supply, few export opportunities and strong competition in the European market are behind these decreases.
Buying interest has remained poor throughout the month, weakening producers’ bargaining power. Demand is below 2010 levels, particularly in the south of Europe, where the long-lasting consequences of the downturn in the housing market have continued to dampen activity in the downstream construction market, which accounts for 50% of PVC consumption.
“The situation has become dramatic in Spain,” a supplier said. Producers are having a lot of problems and several closures are expected in future, it added.
Stocks are very high across Europe, while operating rates have suffered gradual cuts over the past weeks. Currently, these are at 70-80%.
“Operating rates need to be close to 90% for the PVC business to be profitable, so something close to 80% is a disaster, a loss-making business,” a producer said. Suspension PVC is a loss-making segment for all of us, and it has been so since 2009, it added.
The spot market is quiet. There are many offers and a wide range of figures, but very little business. Spot offers in the low €700s/tonne have been heard. However, this could not be confirmed at source. Pending further activity, spot prices remain stable at €730–750/tonne FD EU (European Union).
Suppliers’ efforts to offset low European demand with exports have been undermined by high feedstock and energy costs, softening Asian and US prices, and negative sentiment in the global economy.
The outlook points to further lengthening of the European market, as demand in the construction industry will remain slow until the middle or end of the first quarter of 2012, suppliers said.
Producers’ hopes that feedstock ethylene would drop by €40–80/tonne for December, which would ease pressure on margins, are beginning to fade as early negotiations for that month's ethylene contracts are already pointing to flat prices to small decreases from November.
($1 = €0.75)
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