05 December 2011 12:39 [Source: ICIS news]
LONDON (ICIS)--European vinyl chloride monomer (VCM) prices hit a 30-month low after trades between northwest European suppliers and east Asian buyers were concluded at $830-850/tonne (€617-632/tonne) CFR (cost and freight), market sources said on Monday.
Market activity in Europe has picked up because of increasing demand from the Asia-Pacific region, where outages at ?xml:namespace>
Taking into consideration a freight cost of approximately $250/tonne, European prices are now at $580-600/tonne FOB (free on board) NWE (northwest Europe), down by $170-180/tonne from last week.
These values are still unlikely to stir buying interest from the downstream polyvinyl chloride (PVC) market as such figures do not generate sufficient netback once converted into PVC, buyers said.
“The current price levels are not competitive enough,” a PVC producer said.
He explained VCM prices would need to decrease to $500/tonne FOB in order to be competitive.
On the other hand, European producers reiterate they are not tempted to produce any additional material with the intention of offering into the merchant market at these prices, given the high costs of ethylene and energy.
However, as demand for PVC slows towards the year-end and fears of a double-dip recession grow, producers are increasingly willing to seek alternative markets, even at very low margins, in an effort to end the year with low VCM stocks.
Tightness in the Asia-Pacific market has therefore provided an opportunity for European VCM producers seeking to clear tanks without having to dump material in the domestic market.
The European spot market for VCM, 99% of which is used in the production of PVC and co-polymers, remains illiquid, with very little trade reported during 2011.
($1 = €0.75)
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