13 January 2012 12:51 [Source: ICIS news]
LONDON (ICIS)--Contract price negotiations for January in the European polyvinyl chloride (PVC) market started this week, with price ideas moving in different directions, depending on the region and the players' position in the market, sources said on Friday.
In the Mediterranean, the longer Christmas holiday season and poorer conditions in the downstream construction market are likely to limit potential increases. Overall, buyers across Europe seem reluctant to accept the rises announced by producers at the start of the month.
Northwest European suppliers are aiming for a €50-60/tonne increase in January contract prices to recover margins and offset upstream price developments – the January ethylene contract price settled at €1,120/tonne FD (free delivered) NWE (northwest Europe), up by €40/tonne from December.
However, a Mediterranean producer said a €50/tonne rise will be very difficult to achieve because southern European players usually have a later start after the Christmas holidays. “I expect increases of €20–30/tonne. This is not a question of demand, but of empty pipelines everywhere,” the producer said.
Buyers across Europe are expecting anything from a rollover to plus €20/tonne because of market fundamentals. “Demand is higher than December, which was a very low month, but demand is only reasonable,” a buyer said.
“Increases of €40–50/tonne are far beyond any achievable number,” another buyer said. “Producers will attempt to capture the ethylene increases, so they will be satisfied with plus €10–20/tonne,” the second buyer added
A third buyer said: “Demand has increased because of high destocking activity at the end of 2011. But how much of this activity will be ongoing? Normally, the peak reached in January will end once buyers have restocked. Potential increases depend on market conditions, and recession is going to hit us in 2012.”
Despite rollover announcements by producers at the start of December, most PVC contracts for that month settled down by €20/tonne as a result of poor downstream demand and negative economic sentiment.
($1 = €0.78)
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