05 September 2012 07:21 [Source: ICIS news]
By Feliana Widjaja
Spot PVC import prices in China hit a two-month high of $990-1,000/tonne (€792-800/tonne) CFR (cost & freight) CMP (China Main Port) on 31 August, up by $130-140/tonne or about 16% from 6 July, according to ICIS data.
Over the same period, feedstock ethylene gained 26% to $1,300-1,350/tonne CFR northeast (NE)
Majority of market participants in the PVC market are expecting October offers, which are likely to be released in the coming weeks, to be higher amid a feedstock cost push and continued tightness in supply.
“The PVC price trend is still upward because supply is tight and ethylene is extremely high,” a northeast Asia-based producer said.
Buying activities started to pick up in July as PVC prices were deemed to have bottomed out. Restocking activities among buyers who needed to replenish their low inventory levels boosted prices, market sources said.
Nonetheless, fundamental demand in
Manufacturing activities in
A reading below 50% indicates a contraction in manufacturing output.
Despite the less-than-rosy downstream demand outlook, buyers have to accept higher PVC prices in the absence of lower-priced cargoes in the market, industry sources said.
“September prices increased sharply from August because of tight supply and not because of real demand,” a China-based trader said.
In southeast Asia, PVC prices were at $1,000-1,020/tonne CFR SE (southeast)
Stand-alone PVC producers in southeast Asia were said to be facing mounting cost pressure on the back of steep prices of feedstock vinyl chloride monomer (VCM), industry sources said.
“We are looking at breakeven cost condition now. The margin is very thin,” a PVC producer in southeast Asia said.
Furthermore, short VCM supply in the region is causing some PVC manufacturers to operate at reduced rates, market sources said.
“Everybody is affected by VCM. The raw material is more expensive than the product [PVC],” another PVC producer in southeast Asia said.
VCM prices were last assessed at $850-870/tonne CFR SE Asia on 31 August, gaining $90-100/tonne or 12% in a span of six weeks from $750-780/tonne CFR SE Asia on 20 July.
Considering current VCM prices, PVC converters can still make a profit for domestic sales but the margin for exports is very narrow, according to a southeast Asia-based PVC producer.
As a result, many PVC producers in the region preferred to sell to their respective domestic markets to generate better netbacks, thus limiting exports.
Lower availability of spot cargoes for exports is exerting upward pressure on international PVC prices.
“Supply is tight, therefore buying activity is good. I am optimistic that price[s] will go up,” a third southeast Asia producer said.
($1 = €0.80)
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