16 March 2012 23:59 [Source: ICIS news]
LONDON (ICIS)--Initial European March polyvinyl chloride (PVC) contract prices have settled at an increase of €60–80/tonne ($79–105/tonne) FD (free delivered) from February on higher feedstock and energy costs as well as on tight supplies, market sources said on Friday.
In northwest Europe, some settlements and ongoing discussions suggest an increase of €60–80/tonne FD NWE (northwest Europe), although some producers are declining rises below €80/tonne.
In the UK, initial contract prices have settled up by £50–60/tonne FD (€60–72/tonne, $78–94/tonne) from February. Some producers have achieved £60/tonne, but there is no buy-side confirmation above £55/tonne.
“We are firm on €75/tonne in mainland Europe and £60/tonne in the UK – we are not making any exceptions,” one producer told ICIS. “PVC still is very tight – we have strict allocation and order control in place.”
In the Mediterranean, negotiations are still at an early stage, but most discussions point to increases of €60–70/tonne from February, depending on the particular region and market source.
In Italy, some contracts have already settled with increases of around €65–70/tonne, despite an initial hike announcement of €80/tonne FD.
“Producers were very strong at the beginning of the month, but downstream markets are weak,” an Italy-based PVC buyer said.
“Our customers seem in no rush to buy material. They were reluctant to accept price increases in February, so we lost lots of orders.”
In Spain, increases are in the range of €60–65/tonne FD, according to suppliers and buyers.
Higher price rises were heard in Greece, central and eastern Europe.
“We haven’t finalised our PVC [contracts], but unfortunately we expect increases of €75–85/tonne again in March,” a Greece-based buyer said.
“The availability of some grades is tight, and with some announced maintenance stops, we will probably see some tightness still in April.”
In the central and eastern European markets, producers are said to be achieving hikes of €80/tonne and above from February.
“The market is very tight. We are sold out, with no availability for spot,” a producer said.
Although February and March price hikes have improved PVC margins in relation to the rising costs of feedstock ethylene, producers say these have not been enough to recover the losses suffered in the second half of 2011.
“We have only seen a small improvement,” said a northwest European producer that has achieved an average increase of €60/tonne.
“For a long time, we failed to cover the ethylene costs,” another producer said. “The situation is a bit better now, but it is not enough.”
European PVC production rates have increased over the past two weeks, as four major producers have restarted operations after weather-related production outages.
However, the low inventory levels and improving demand coming from the start of the downstream construction season are likely to keep the market tight throughout March and April.
Further price hikes are expected for April PVC contract prices on poor availability and anticipated ethylene cost rises.
In the meantime, buyers in the Mediterranean have received offers from Asia-Pacific producers at slightly lower prices than those available in Europe.
“I had not heard imports from the Far East in a long time,” an Italian buyer said. “Import prices are not much lower, but are putting a question mark [over] the viability of future increases.”
($1 = €0.76, $1 = £0.64, €1 = £0.83)
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