25 May 2012 23:59 [Source: ICIS news]
LONDON (ICIS)--May contract price discussions in the European polyvinyl chloride (PVC) market have settled with a rollover, most producers and buyers said on Friday.
At the beginning of May, European producers were optimistic about another increase, following three months of outage-related tightness and price hikes.
Three producers announced target increases of up to €50/tonne ($62.5/tonne) aimed at offsetting high production costs and recovering the margins lost during the destocking cycle in the second half of 2011.
On the other hand, buyers were seeking a decrease 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.
Market players confirmed small increases in early May, driven by a small improvement in demand and the start of the downstream construction season.
However, anticipation of lower feedstock costs – the June ethylene contract price settled down by €120/tonne – sent buyers to the sidelines of the market during the second half of May and forced producers to cut production to offset low demand, with operating rates between 70-80% reported by some.
“No one [would] consider any further business in May. Everyone was waiting for June [ethylene contract price] to settle,” a producer said.
PVC prices settled by and large with a rollover, although some increases and decreases were also confirmed by market players.
“A rollover was the maximum price you could get,” a producer said. He added that lower ethylene and PVC prices were unlikely to drive greater demand for PVC.
“As soon as you enter a drop in feedstock prices, everyone will wait for further decreases,” the producer said.
($1 = €0.80)
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