26 October 2012 09:02 [Source: ICB]
Polyvinyl chloride (PVC) - characterised as either rigid resins or flexible resins - is a versatile thermoplastic with many applications.
Flexible PVC resins, which contain a large proportion of plasticisers to make them soft and stretchable, find outlets in films, sheets, wire, cable coatings, floorings, shower curtains and synthetic leather products.
PVC demand in Asia is estimated at 18m tonnes/year, roughly half of global demand. Asia's total capacity of 30.5m tonnes/year, is around 60% of global capacity. China, the world's largest consumer and producer of PVC, accounts for 35% of global PVC demand and close to 40% of global capacity. In the past five years, PVC capacity has doubled in China from 10m tonnes/year in 2006 to more than 20m tonnes/year in 2011. The average operating rates of domestic plants will fall with new project launches amid PVC oversupply in the country.
PVC prices were last assessed at $980-990/tonne CFR China Main Port (CMP) on 19 October, falling by $30-40/tonne from September, at $1,010-1,030/tonne CFR CMP.
Downstream demand in China is lacklustre and end-users purchased on a hand-to-mouth basis amid limited orders for their products as exports took a beating from the eurozone debt crisis and the unstable US economy.
In 2012, prices reached the peak at $1,040-1060/tonne CFR CMP in April, driven by tight supply and high feedstock ethylene and vinyl chloride monomer (VCM) prices. However, prices slipped amid sluggish demand and poor market sentiment to reach the year's low at $850-870/tonne CFR CMP in June.
Polymerisation is normally performed at 40-70e_SDgrC with the vinyl chloride monomer (VCM) in a liquid state under pressure in a batch reactor. Suspension polymerisation is the most common PVC process because the resins produced are the most versatile and suitable for a wide range of applications.
The resin produced from the polymerisation process is hard and brittle and requires conversion into a compound by the incorporation of additives such as plasticisers, modifiers, stabilisers and processing aids before conversion into finished products.
The production process of PVC can be classified into ethylene-based or carbide-based. More than 70% of Chinese PVC producers are carbide-based, while outside China, all other PVC producers are ethylene-based.
PVC demand and capacity growth in China is expected to slow, in line with the country's lower GDP growth forecast, coupled with worries about the weakening global economy.
China posted third-quarter GDP growth of 7.4% - the slowest pace recorded in more than three years, data from the National Bureau of Statistics showed. China is targeting a 7.5% growth for the whole of 2012, lower than the 9.2% expansion in 2011.
Despite the bearish economic outlook, loosening monetary policies in China implemented by the government in the hope of stimulating investment and demand in the country may improve market sentiment eventually.
Relatively high ethylene prices in the near term are expected to exert cost pressure on PVC producers, which will provide support on prices.
However, gains may be undermined by the prevailing weak downstream demand.
PVC market recovery is expected to be sluggish because of the uncertainty surrounding the global economy as well as the volatile crude futures.
Furthermore, the fourth quarter is typically an off-peak season, which may dampen buying appetite for PVC and hamper trades.
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