FocusEurope PVC tightness eases on improved supply and slow Easter

13 April 2012 13:27  [Source: ICIS news]

LONDON (ICIS)--Tightness in the European polyvinyl chloride (PVC) market has eased on higher operating rates and slow Easter holiday demand, market sources said on Friday.

Major producers are now up and running after weather-related production outages in February and early March.

French specialty chemical firm Arkema lifted force majeure on PVC supplies from its 270,000–280,000 tonne/year Berre facility in southern France on 13 April, according to a company source.

The force majeure declaration was a consequence of feedstock vinyl chloride monomer (VCM) scarcity, caused by an unplanned shutdown at the company’s VCM plant in nearby Fos-sur-Mer in February. Production at the VCM plant restarted in mid-March.

Higher PVC production rates have supported a 5.6% increase in feedstock chlorine production. According to industry body Euro Chlor, average daily chlorine production in Europe stood at 27,634 tonnes in March, up from 26,169 tonnes in February.

Improved supply has been acccompanied by softening demand from the key local construction sector, especially in Italy, France and Spain, because of the Easter holidays.

The market is not so tight,” a buyer said. “We have had no delays in orders.”

However, inventories remain on the low side and there is little availability for spot or export deals.

Contract price discussions for April are ongoing but there is confirmation from producers and buyers of contract deals concluded with an increase of €50–60/tonne ($66–79/tonne) FD (free delivered) from March.

Two producers have announced target price increases of €100/tonne and €125/tonne respectively for April, but most players consider these announcements to be unrealistic.

Price increases are aimed at passing the ethylene increase – €40/tonne from March – and recovering part of margins lost since the destocking cycle started in mid-2011. 

Increases of around €60/tonne are necessary to ease margin pressure on the PVC and chlor-alkali markets, especially since there is little hope of a margin improvement from the caustic soda side, a producer said.

Despite announcements of an increase of €40/dry metric tonne (dmt) by two producers, negotiations for Europe caustic soda second quarter contract prices are pointing to rollovers or small decreases, depending on the source and region.

“We do not have any credit improvement in the caustic soda business, so we have to look for margins directly in PVC,” a producer said.

Europe March PVC contract prices settled at an increase of €60–70/tonne FD from February on market tightness and higher production costs.

($1 = €0.76)

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By: Abache Abreu
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