FocusIndia PVC may soften on abundant supply in domestic market

03 October 2012 05:58  [Source: ICIS news]

By Veena Pathare

SINGAPORE (ICIS)--Spot import prices of polyvinyl chloride (PVC) in India may continue to soften in the coming weeks on strong availability of material in the domestic market, industry sources said on Wednesday.

Buying usually picks up in mid-October ahead of the Diwali holiday in India, but buyers may stay at the sidelines until prices fall further, market sources said.

On 28 September, PVC prices were assessed at $1,005-1,070/tonne (€784-835/tonne), down by an average of $20/tonne from the previous week because of a seasonal slump of demand post-monsoon, according to ICIS.

A season of heavy rains in India annually occurs from June to September.

Asian and US producers supplying to India are under pressure to lower PVC offers for October shipments as lower-priced cargoes booked in June-August started arriving in the south Asian country, discouraging fresh imports, they said.

A relatively high volume of PVC cargoes from Europe, as well as carbide-based material from China started flowing into the south Asian country in late September, market sources said, although no estimates were provided.

“These [European, Chinese] cargoes are being sold at a discount of Indian rupees (Rs) 4-5/kg to the PVC list prices, giving a perception of oversupply in the market, driving prices downward,” a regional producer said.

Indian PVC list prices for October stood at Rs77-78/kg ($1.47-1.49/kg) DEL (delivered), which is equivalent to $1,100/tonne CFR India – a roll-over of September prices.

Availability of cheaper material sent regional traders and distributors to panic and start offloading Asian cargoes at lower prices, the producer said.

“Buyers say that when the same product is available with the local distributor at lower prices, why should [they] source imports,” said an Asian PVC producer.

A major Indian PVC producer announced a roll-over of its September prices for October for the time being, in the absence of clear direction from the key Chinese market. The producer said it would issue fresh list prices later in the month.

China is on a week-long celebration of its National Day.

Market participants in India expect the PVC list prices to decline, given the present post-monsoon slump in demand and downward pull from imported cargoes.

Between early June to mid-September, PVC import prices in India steadily increased, gaining almost 20% on average before falling in the last week of September, according to ICIS data.

“You can definitely expect a correction in the list price later in the month, since there is also pressure from the downstream pipe buyers to lower prices for PVC pipes,” said a PVC producer that also manufactures PVC pipes.

As costs of PVC pipes increased, in line with rising raw material prices, pipe buyers have started preferring to purchase HDPE pipes, which have a higher impact resistance than PVC pipes.

PVC pipes and fittings are generally used in subterranean irrigation that does not expose them directly under the sun, which makes PVC plastics brittle.

At current prices, the gap between HDPE and PVC pipes has narrowed below Rs5 per unit from the usual gap of Rs7-8 per unit.

($1 = €0.77 / $1 = Rs52.40)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Veena Pathare
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