Europe May PVC contract prices to roll over or increase

04 May 2012 13:30  [Source: ICIS news]

Europe May PVC contract prices to rise or roll overLONDON (ICIS)--May contract price negotiations in the European polyvinyl chloride (PVC) market are pointing to rollovers or increases of up to €50/tonne ($66/tonne), market sources said on Friday.

Three European PVC producers have announced target increases of €50/tonne for PVC grades with immediate effect and as contracts allow, aimed at offsetting high production costs and recovering the margins lost during the destocking cycle in the second half of 2011.

The outcome of negotiations - still at an early stage - will depend on demand, which has seen some improvement since mid-April, driven by the start of the downstream construction season.

This is particularly the case in Germany and the Benelux region (Belgium, the Netherlands and Luxembourg), but demand in the Mediterranean market is not as strong as expected.

“We are positive about another substantial increase,” a producer said. “Spot prices are climbing up”.

The European spot market is healthy, with most deals concluded at €900-930/tonne FD (free delivered) EU (Europe).

Buyers, on the other hand, remain confident that a rollover will be possible because of lower feedstock costs - the European ethylene contract price for May settled down by €20/tonne - and the poor outlook of the European construction industry.

“I heard increases of €20-50/tonne, but a rollover from April is a possible outcome,” a buyer said.

The PVC market has balanced out after three months of tightness and price hikes, while domestic and global demand for finished products is not as strong as expected, a second buyer said.  “There is no room for another increase”.

April PVC contract prices settled with average increases of €45–60/tonne from March, according to producers and buyers.

($1 = €0.76)

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By: Abache Abreu
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