China PVC market expects slow recovery on poor demand

22 June 2012 06:47  [Source: ICIS news]

SINGAPORE (ICIS)--Ample supply in the Chinese polyvinyl chloride (PVC) market is likely to persist in the near term, driven by poor domestic demand and bearish global economy, according to ICIS on Friday.

Loosening of monetary policy in China may eventually improve market sentiment, ICIS said in a presentation at the 16th World Chlor-alkali Conference (21/22 June), organised by ICIS and Tecnon OrbiChem.

China’s decision to cut interest rates by 25 basis points could stimulate PVC demand,” ICIS said.

Also, Chinese government’s plan to build 36m affordable public houses as stipulated in its five-year plan may also drive demand.

However, the recovery is likely to be slow, as any gains made through government-driven incentives may be undermined by weak downstream demand and bearish global economy, with weak US economy and the eurozone debt crisis expected to dampen the re-export market.

In south east Asia, oversupply is expected to persist over the next five years. In 2011, there was a supply surplus of about 0.7m tonnes out of a total capacity of 2.2m tonnes.

Of this capacity, Thailand accounts for about 39%, followed by Indonesia (30%), Vietnam (14%), Malaysia (12%) and the Philippines (5%).

South east Asian demand is forecasted to grow by 4.4% per year on average over the next five years.

PVC demand in the region grew by around 2% on average from 2006-2011, with Indonesia and Vietnam showing the highest growth rate, at 5% CAGR.

The Asian market has been a key driver of recovery in the global PVC market since the 2008 financial crisis.

Asia is expected to account for 64% of global capacity by 2013, with China playing a key role in Asia’s supply and demand growth.

China is the world’s largest consumer and producer of PVC, accounting for around 30% of global PVC demand and 60-65% of Asia’s consumption.

PVC demand in China in 2011 was estimated at around 13.3m tonnes in 2011, up by 8% from 2010.

($1 = €0.80)

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By: Abache Abreu
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